Since President Obama’s re-election, Republicans have made rhetorical overtures towards increasing revenue to avoid the coming fiscal cliff, but have so far refused to budge on increasing marginal tax rates on Americans earning more than $250,000 a year.
Instead, GOP leaders have laid out a “compromise” that is virtually identical to the tax proposal offered by failed presidential candidate Mitt Romney, arguing that the country can increase revenue by closing tax loopholes and relying on economic growth. On Tuesday morning, Sen. Roy Blunt (R-MO) directly encouraged Obama to find common ground with Republicans by adopting Romney’s economic proposal:
BLUNT: I think, frankly, this is a great opportunity for the president to step forward, he’s just been reelected, he doesn’t have to run for office again, and come up with a plan that actually can pass. And I think that means, don’t do the across the board cuts, come up with a way to have really targeted cuts and look at ways to increase revenue by one growing the economy, and two, maybe look at the tax code, just like Governor Romney suggested, you look at tax code and increase revenue without increasing taxes.
Adopting Romney’s policies is both bad politics and policy. Republicans have long relied on reducing or eliminating tax deductions to pay for lower income tax rates and deficit reduction — even though tax reform would not produce enough savings to lower tax rates and cut the deficit, and would target deductions that benefit middle class Americans. As the Congressional Budget Office concluded, “Given the barriers to eliminating or reducing most tax expenditures, it may prove difficult to gain more than $100 billion to $150 billion” a year from this approach.
Keeping tax rates low for the richest Americans would also have no significant negative impact on the economy and, if history is any guide, is unlikely to produce the kind of economic growth Republicans anticipate.