In the primary and the run-up to November, the Republican candidates presented various tax reforms all designed around the same basic concept: cut deductions and loopholes, use those savings to cut tax rates, and rely on boosted economic growth from the reform to bring in new revenue. Within a day of President Obama’s re-election, and the voters’ rejection of their party’s economic vision, House Speaker John Boehner (R-OH) and other Republican lawmakers shifted to proposing that Congress… cut deductions and loopholes, use those savings to cut tax rates, and rely on boosted economic growth from the reform to bring in new revenue.
ThinkProgress has the video report. Watch it:
Besides mangling the dictionary definition of “compromise,” there is a large practical problem with this idea: there’s no evidence that it actually works. A tax reform based on the same framework was signed by President Ronald Reagan in 1986; no noticeable change in economic growth or the trend in unemployment resulted. The vast majority of historical and analytical evidence says that tax rates, especially those for the wealthy, have no particular relevance for economic growth.
Which is not to say there aren’t good reasons to clean up the tax code — just that boosting economic growth or bringing in new revenue aren’t among them. More revenue could be produced by cutting tax deductions without also cutting rates, and there’s substantial revenue to be gained by cutting deductions for the wealthy — just not enough to come anywhere near President Obama’s goal of $1.6 trillion in new revenue. The remaining alternative is raising tax rates.