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January 02, 2013

The GOP Didn’t Actually Agree to Raise Taxes

Posted in: Uncategorized

The Obama administration has declared victory with the new tax deal. They believe they got 85 percent of what they wanted on taxes and more importantly the administration claims they finally broke the back of the Republican party’s opposition to raising taxes. President Obama said, “Thanks to the votes of Democrats and Republicans in Congress, I will sign a law that raises taxes on the wealthiest 2 percent of Americans.”

I don’t know if the Obama team actually believes this or if this is just PR to sell the deal to their base, but it is both factually and tactically wrong.

This deal did not technically raise any new revenue. The American Taxpayer Relief Act of 2012 was not passed until January 1st of 2013. By that point taxes on everyone had already reverted back to their Clinton-era levels. Relative to current law this new law was a massive tax cut for everyone, including the rich. While the GOP ended up agreeing to cutting taxes on the rich by a slightly smaller amount than they initially wanted, Republicans still technically only voted for a massive tax cut. This is why Grover Norquist admits the deal was not technically a violation of the anti-tax pledge.

This is not just hair splitting, but has very important long term tactical implications. If Obama actually got Republicans to agree to a real tax increase it could signal a new ability to reach broader deals in the future which actually contain additional revenue. Instead Democrats simply exploited a one-time strange quirk in the law to claim a vote for a massive tax cut was a vote by Republicans to raise taxes on the rich.

This was only a one-time leverage point that has now been used up, not a sign of a new Republican willingness to accept tax increases.


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