Raising Taxes Without Raising Tax Rates

Via Steve Benen, it looks like Senate Minority Leader Mitch McConnell opened the door on Sunday to drawing a distinction between raising “tax rates” and raising taxes, the latter of which could be accomplished by modifying deductions and loopholes.

I don’t agree with McConnell that higher rates should be off the table, but I do think it’s true that that closing loopholes and deductions is the superior means of raising revenue so as a basis for an interim bipartisan deal it works for me. One important issue to note is that these tax expenditures are upside down and deliver much more subsidy to rich people than to the middle class, even if the middle class does receive some subsidy. My colleague Seth Hanlon has, for illustrative purposes, this look at the infamous home mortgage interest tax deduction:


Eliminating deductions or replacing them with flat credits is a highly progressive way of increasing tax revenue that doesn’t entail any increase in tax rates. Grover Norquist has been pushing against the idea that this might be an acceptable approach, but if McConnell is willing to consider it that would be very good news.