Republican image on taxes takes a hit
Along the way to deciding whether to extend President Obama’s payroll tax cut, something damaging happened to the Republican Party’s once-dominant position on tax policy.
Republicans have had a clear advantage in voters’ minds on taxes for years, in part because of a popular and unified message in favor of tax cuts.
But on the payroll tax, Obama and congressional Democrats had a simple story line — that Republicans were holding up a tax break of $20 a week for 160 million working Americans.
Republicans responded with disparate positions. Some argued that the payroll tax reduction, unlike other tax cuts, wouldn’t pay for itself by spurring the economy and thus should be paid for with spending cuts. Others said it was a bad time to allow any tax to rise. And a few Republicans didn’t want to vote for a bill that would represent a political win for Obama.
The divergence of opinions was made clear this week when House Speaker John A. Boehner (R-Ohio) dropped the GOP leadership’s insistence that the cost of extending the tax reduction be offset by spending cuts. Senate Republican leader Mitch McConnell of Kentucky said he did not “have a view” on that strategy.
With votes in Congress expected Friday, the differences continued.
“This is not a time to increase the taxes of the American taxpayer,” said Republican Sen. Marco Rubio of Florida, a tea party favorite, who said he was inclined to support the compromise.
Fellow GOP Sen. John Thune of South Dakota, a party leader, was noncommittal about whether he’d support the approach. “I would prefer to pay for it,” he said.
And Sen. Patrick J. Toomey of Pennsylvania, the former chairman of the conservative Club for Growth, said he was not sure whether he would vote for the emerging measure. “Still wrestling with it,” he said.
The way the debate took shape has “certainly caused damage” to the GOP image, House Budget Committee Chairman Paul D. Ryan (R-Wis.) said Thursday. “It muddled the differences” between the two parties, he said.
The impact can be clearly seen in polls, which have shown the public souring not just on Congress in general, but on Republican lawmakers in particular.
A year ago, 63% of voters disapproved of the way congressional Republicans were doing their jobs, according to a Washington Post/ABC News poll; by January, after the bruising first round of the payroll tax fight, that number hit 75%.
Voters were evenly divided when asked who they would trust more with the issue of “handling taxes” — Obama or congressional Republicans.
“The shifting debate on taxes is one of the biggest things that has happened here,” wrote Stanley Greenberg and James Carville of the Democratic-aligned firm Democracy Corps, which released a Greenberg Quinlan Rosner Research poll on Thursday that found a 10-point swing toward Democrats on the tax issue. “The tax debate is shifting heavily against the Republicans.”
Anti-tax stalwart Grover Norquist, president of Americans for Tax Reform, acknowledged what he called a “hiccup” in the normally more-unified GOP message on taxes.
But Republicans have never considered all tax breaks as equal, despite their pro-tax-cut rhetoric. Ryan and other conservatives are most interested in permanently lowering marginal income tax rates. They say such cuts would stimulate the economy and thus pay for themselves with new tax revenues.
They view the payroll tax break as a temporary “sugar high,” in Ryan’s words — a stimulus program that should be financed with spending cuts from existing programs.
Complicating the GOP message: Because the payroll tax break trims 2 percentage points from workers’ contribution to the Social Security trust fund, many lawmakers wanted the retirement account replenished with savings from spending cuts rather than general funds, which increases the deficit.
The Congressional Budget Office said extending the payroll tax cut would add half a percentage point to the nation’s gross domestic product in 2012.
Norquist believes Republicans will retain their dominant position on taxes once Congress begins debating the George W. Bush-era tax cuts due to expire at the end of December. Obama wants to do away with the breaks for households earning more than $250,000 a year and individuals earning more than $200,000.
“At the end of the day, Obama’s asking for about a $1 trillion in new taxes,” Norquist said. “And that means he’s coming for you, which will be an easy case to make.”
Yet even on the Bush-era tax breaks, GOP deficit hawks are having second thoughts.
Republican Sen. Saxby Chambliss of Georgia suggested those tax cuts will need to show “real evidence” that extending them will stimulate the economy.
Otherwise, “I would argue very strongly for paying for tax cuts from now on,” Chambliss said, who has led bipartisan efforts to reduce the nation’s debt. “We’re getting ourselves deeper and deeper into a hole, and we’re not going to get out of this hole by not paying for expenditures. Period.”
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