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Revenues and Republicans: Reasons for Hope

David Callahan

True or false: A sizeable slice of congressional Republicans would vote for revenue increases, if packaged the right way.

True, at least according to Senator Tom Coburn, a Republican from Oklahoma, writing today in the New York Times. Coburn argues that Grover Norquist's clout on Capitol Hill is way overrated and says there is plenty of evidence that Republicans would go along with new taxes, such as House Speaker John Boehner's acquiescence to hundreds of billions in revenues as part of a failed Grand Bargain with President Obama last year. And then, of course, there is Coburn's own successful effort to eliminate tax credits for ethanol, which we wrote about here last year.

Coburn says that Republicans:

understand that the tax code is riddled with special-interest provisions that are merely spending by another name. If asked to eliminate earmarks for things like Nascar, the tackle-box industry or Eskimo whaling captains — all of which are actual tax “breaks” — most of my colleagues would be embarrassed to demand dollar-for-dollar rate reductions, and rightly so.

As a result, rather than forcing Republicans to bow to him, Mr. Norquist is the one who is increasingly isolated politically. For instance, while his organization, Americans for Tax Reform, was calling my ethanol amendment a tax hike, the Club for Growth, which is far more influential among conservative lawmakers, endorsed my amendment outright.

Coburn comments that the conservative "starve the beast" strategy for downsizing government, often attributed to Norquist, has been "a disaster." Reduced revenue hasn't meant lower spending, just more borrowing that future generations will eventually have to pay off with higher taxes.

It sure is nice to hear a Republican state this truth, which has been glaringly obvious since the low tax rates and exploding deficits of the Reagan years.

Coburn argues the Republicans are ready and waiting for deal-making that would include entitlement reform that reduces spending and tax reform that closes loopholes, creates a more efficient tax system, and -- yes -- raises new revenues.

Coburn faults Obama and other Democrats for turning away from this sincere flexibility and instead playing political games with taxes by calling for higher taxes on the rich.

Is Coburn right? Yes and no.

It is true, as I have written often here, that many Republicans in Congress want to tackle tax reform and some of these members are willing to close loopholes in a way that brings in new revenues -- as the ethanol episode shows. It's also true that some are willing to go along with a grand bargain that links new revenues to entitlement reform.

But Coburn's take is off in important respects. First, Republican willingness to talk taxes in return for spending cuts is meaningless if the ratio of spending cuts to tax hikes they expect is overwhelmingly tilted in their favor, which has been the case. Such a deal wouldn't be a grand bargain; it would be gigantic defeat for Democrats and their core constituencies, which will never happen -- or shouldn't, anyway. So what Coburns sees as flexibility is actually just more rigidity.

Second, Coburn is wrong that Obama is merely playing politics with his proposals for hiking taxes on the rich. Economic inequality, and a tax code that fans this inequality, is a hugely important issue and Obama is right to put it on the table. Especially when his opponent is proposing new tax cuts for the wealthy and has personally benefited from tax loopholes that favor the rich. Whatever Congress does on taxes, whether a big reform or not, the rich should take a big hit and Obama is laying the groundwork for that.

Anyway, now is not the time to do tax reform, and Coburn surely knows that. The powerful interest groups that will get hurt by tax reform have maximum leverage with members of Congress during an election year, when every member is scrambling for donations. And no member wants to tick off large blocs of reliable voters just as election day approaches, which is what Congress would do if it pared back the home mortgage interest deduction or other popular tax breaks.

Tom Coburn is one of the most interesting Republicans to watch right now on the issue of taxes and he's sharing an important message that Democrats should listen to. But he's also only partly right.