Demint and Sanders Unite on Taxes

Sound crazy?  Well, it’s not.  Socialist Bernie Sanders and Tea Party Senator Jim Demint are effectively working right now (or at least pretending to do so to impress their constituencies) in fighting against the tax compromise being considered in Washington.  Politically, it’s easy to posture against what’s going to happen and throw rhetorical red meat to your masses. Make no mistake, that’s what both of them are doing.  We’re hearing fevered screams from everyone on the left and from a sizable percentage of powerful voices on the right calling for grassroots action to push for rejection of the “tax compromise” reached between Congress and the President.

If you noticed the typical and deeply disheartening chorus from the left, you would have learned that this “compromise” is intolerable and it must not be accepted because it somehow represents a handout to the rich, who are evil and have caused all of our economic pain and must be stopped.  Critics on the right have pointed out that the bill contains excessive spending, a counterproductive expansion of unfunded unemployment benefits, special-interest ethanol subsidies and ugly earmarks.

I agree with all the criticisms from the right.  The bill is far from perfect.  It’s ugly.  What’s wrong with the bill, however, is only one third of this debate at best.  There are other questions that need to be considered when one considers the fate of this compromise.  First, if you urge opposition to the bill and achieve its defeat, what is the realistic alternative?  “Realistic” is the operative word here.  My friends on the right opposing this bill have said we should sack the whole deal and negotiate from a position of strength when we are in control of the House.

Let’s be honest.  If you are urging opposition to this bill, you are supporting a tax increase.  If the bill is defeated, the Bush tax cuts will expire.  There is a whole schedule of tax hikes scheduled to take effect.  Personal tax increases will increase in 2011 and 2012.  The tax rate at which a majority of small businesses pay taxes will increase by 40 percent.  The capital gains tax will increase.  The top dividend tax rate will rise from 15 to nearly 40 percent.  The marriage penalty returns and the child tax credit would be cut in half.  And, the Death Tax will increase to 55 percent, rather than the 35 percent included in the compromise.  Oppose this compromise and you are supporting those increases.  Period.

As Grover Norquist from Americans for Tax Reform points out, one of the gravest consequences of opposing this bill is that the number of families affected by the Alternative Minimum Tax (AMT) would rise from 4 million to 28 million in the 2010 tax year.  Defeat the compromise and you are supporting a tax increase for 24 million American families.  While Norquist supports repeal of the AMT, he’s insightful enough to recognize that a one-year solution here is better than none at all.

Senator Jim Demint and Club for Growth have made compelling cases about what’s wrong with the bill.    Erick Erickson of RedState has said he thinks it needs to be killed, but wisely indicated that it’s not without a gamble.  It’s a big gamble.  The reality is that urging support for defeat of this bill is urging support for all of those tax increases taking effect.  Congressman Paul Ryan, the incoming House Budget Chair, is a cooler head.  Ryan contends that while he finds the compromise deeply distasteful and prefers permanent tax rate reductions, stopping all of these tax increases from taking effect in January is the paramount priority.

Ryan understands something fundamental that too many critics on the right are forgetting.  Nancy Pelosi is still the Speaker of the House.  Harry Reid is still the Senate Majority Leader.  Barack Obama is still the President.  If those three choose to let the Bush tax cuts expire and all these tax increases take effect, they can.  If they want to allow four times the number of earmarks in the bill, they can.  If they want to triple ethanol subsidies beyond the atrocity contained in this bill, they can.  If they want extend unemployment benefits longer and increase them, they can.  They can do whatever they want.  Stop the tax increases now.  Work on the rest in January.

With a Democrat-controlled Senate and Barack Obama in the White House, it will be difficult to pass anything in January.  Yes, Republicans will have increased leverage from the House majority.  The most meaningful application of that leverage will be in stopping things, not passing things.  That leverage won’t stop these tax increases in January.   Because they’ll already be in effect.  Let’s stop the tax increases now while we can and use increased leverage to try and fix the flawed portions of the bill or at least embarrass Democrats and wayward Republicans who won’t let it happen.  A bird in the hand is better than two in the bush.

This blog post is reprinted from the original version on The Pundit League.

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