Congress Can’t Avoid Tax Rate Hikes By Closing “Loopholes”
You can tell when Congress and the President have tough choices to make. That’s when they trot out the euphemisms—all aimed at making what they are about to do sound as benign as possible. Case in point: the impending fiscal cliff.
If you listened to President Obama and House Speaker John Boehner’s radio addresses last Saturday, you got an earful of these weasel words, ranging from the merely misleading to the truly Orwellian.
Here are just a few:
Closing tax loopholes: This is a favorite of both parties, but these days it is being used mostly by Republicans who are looking for an alternative to raising tax rates on high-income households. The phrase appears regularly in Boehner’s presentations.
It is true that the tax code includes loopholes that should be closed. But these are narrow and usually unintended gimmicks that allow a handful of sophisticated taxpayers to avoid tax.
Congress will need to raise more than half-a-trillion dollars over a decade to protect top-bracket taxpayers from Obama’s plan to let their tax breaks expire without adding to the deficit. To get there, it will need to cap popular, broad-based tax preferences, such as deductions for mortgage interest, charitable giving, and state and local taxes. It isn’t going to get far by closing a few loopholes.
Entitlements: When politicians use the word entitlement, they really mean Medicare, Medicaid, and Social Security. At least two of those programs, Medicare and Social Security, are enormously popular. So nobody talks about slowing the growth of these senior health care and pension programs. “Entitlement” carries with it a sense of privilege and greed. So much easier to cut en entitlement than to trim promised Social Security benefits.
Shoring up entitlement programs. This is another Boehnerism. It is not enough, it seems, to say entitlement instead of Medicare and Social Security. Now, pols insist they are “shoring up” these programs when they really mean they want to trim promised benefits. For programs that are funded through trust funds, such as Social Security and Medicare Part A, “shoring up” has some meaning (assuming you believe in the trust fund concept at all). But for the rest of Medicare and all of Medicaid, there is nothing to shore up.
These programs are funded through general revenues or, in the case of Medicare, general revenues plus premiums and co-pays. By spending less than government currently expects, you don’t strengthen them. They are being shorn, not shored up.
Making people like me pay a little more: This was an Obama favorite in the campaign. And it never seems to go away. The Tax Policy Center estimates the top one percent of households (who make an average of about $1.7 million) would end up paying almost $94,000 more in taxes under Obama’s 2013 budget, or about 6 percent of their income. I know these folks make a lot of money, and probably can manage this higher tax bill, but a nearly six-figure tax hike is a tad higher than “a little more.”
And it is worth noting that there are not very many people who make Obama-like money. In 2012, there will be only about a half-million households in the top two tax brackets (out of nearly 160 million).
All of this rhetoric is intended to make deficit reduction sound painless. Somebody else will pay—or Congress is not really cutting at all. That mush may have been useful in campaign season. But lawmakers have some obligation to prepare voters for what will be some tough decisions over the next few years. Honest talk is a good way to start.