House Democrats are developing new rules to govern their legislative deliberations when they take control of the House in January. Many, first reported in The Washington Post, are perfectly sensible. One, apparently still under discussion, is awful: It would require a supermajority vote to raise individual income taxes on the lowest-earning four-fifths of taxpayers.
It is the daily double of flawed legislative ideas—both bad politics and bad policy.
As fiscal policy, its wrong-headedness is apparent. We are looking at a budget deficit that will approach $1 trillion in 2019. We are in a period where lawmakers seem barely constrained in their enthusiasm for both cutting taxes and increasing spending. However, at some point in the future-- probably soon after the bond market recoils at the challenges of financing this massive government debt--Congress will awake from its fiscal hangover. Once it does, it inevitably will need to make some sort of fiscal deal that includes both spending reductions and tax hikes. And those tax hikes can’t exclude 8o percent of households.
Who are the top 20 percent?
Today, Republican-imposed House rules require a three-fifths majority to pass any income tax hike. The Democrats still would require a supermajority to raise income taxes for low- and moderate-income households. But, under the proposed rule, the House could pass a tax hike for the top 20 percent by simple majority vote.
Who are we talking about? The Tax Policy Center defines the top 20 percent as those with annual expanded cash income of about $153,000 or more. By TPC’s definition, the House Democrats would require a supermajority to raise income taxes on about 148 million of the nation’s 172 million tax units.
The top 20 percent make about half the country’s after-tax income but already pay about two-thirds of federal taxes.
Which brings us to the politics. Let’s face it, this rule is little more than a watered-down version of the long-standing Republican pledge to never raise taxes. In a misguided attempt to prove that they won’t fulfill all the dire warnings of the GOP and start raising every tax they can get their hands on, Democrats propose a rule. Their problem is that this sort of a stop-me-before-I-tax-again requirement reads like a second-rate version of the Republican’s pledge.
Lacking verisimilitude
But Democrats promising they won’t raise taxes (or at least vowing to make it harder for themselves) is a bit like President Trump signing a national immigration day proclamation. It lacks verisimilitude.
And let’s be real. Democrats don’t really intend to comply with this rule. They will waive it whenever necessary, just as Republican and Democratic congresses in the past routinely ignored all rules intended to maintain some sense of fiscal order.
Worse, they will get positively Talmudic about their rule. It only applies to individual income taxes, they’ll say. Not payroll taxes. Or gas taxes. Or corporate income taxes (that ultimately are paid by actual people—either workers or shareholders).
They’ll say it means net taxes. And that we only meant average taxes for the lowest-income 20 percent. We didn’t mean that nobody will pay more, they’ll insist, just that income groups won’t pay more on average.
Playing on the wrong field
Even dyed-in the-wool, pledge-taking Republicans can tangled up by all this. After all, last year’s Tax Cuts and Jobs Act, which cut taxes by $1.5 trillion over 10 years, ended up raising taxes on an unlucky 5 percent of households in 2018 and will hike taxes on about 9 percent by 2025. The self-described guardian of the pledge, Grover Norquist of Americans for Tax Reform, ignored this heresy last year. He won’t be so kind to the Democrats.
And that in the end is the biggest mistake the Democrats would make by adopting this self-imposed constraint. They’d be playing the tax game on the Republican’s field, even as they attempt to tweak the rules. Democrats never can win the debate over who cuts more taxes. They, and we, would be better off if they spent more time and energy developing sensible fiscal policy and less effort concocting House rules than make them seem what they are not.
