Catch of the Day

I really like Jonathan Chait on Paul Ryan's new go-to excuse on why Republicans can't close tax "loopholes" to raise revenues in regular budget talks -- because supposedly that would make tax reform impossible.

As Chait points out, the odds of tax reform actually happening this year are slim at best. But supporting tax reform, at least in theory, is a cheap way for conservatives to impress centrist Washingtonians.

In fact, Republicans have reserved the symbolic "H.R. 1" designation for their tax reform bill, thus making the claim that it's the centerpiece of their legislative agenda.

I have my doubts. In fact, while it is true that the House has held hearings on tax reform, I strongly suspect that tax reform will wind up exactly as substantive as the "replace" part of "repeal and replace" on ACA was in the last Congress. In other words, they'll keep promising to get to it, but never actually do it. We'll see.

Meanwhile, it's worth pointing out explicitly that Ryan's objection makes no sense at all. Tax reform, everyone agrees, means removing tax exclusions, deductions, and credits. Lowering rates is a consequence of eliminating the other treatments, but changing rates isn't in and of itself reforming; no one thinks that simply cutting tax rates counts as "tax reform." Therefore, getting rid of loopholes doesn't prevent tax reform. It is tax reform! Ryan could, I suppose, argue that removing the low-hanging fruit makes a larger bill harder, but I really don't see why. Every tax provision has lobbyists and interest groups supporting it. Having fewer provisions to eliminate means fewer people objecting to the bill.

Indeed, separating tax increases (however obtained) from the main tax reform bill would make tax reform far more likely, not less likely. Revenue-raising tax reform is basically impossible. Any comprehensive tax reform is difficult because the benefits are general and the costs specific, and usually carried by well-organized, influential groups. Add to that increases in overall revenue, and you make that equation even worse. And that's without the reality that large groups of Republicans (for better or worse) simply will not support higher revenues, even if the GOP leadership might grudgingly go along. No, if you really care about tax reform, the best plan is to divorce it from any search for higher revenues, which would mean accepting higher taxes elsewhere if you have to do it at all.

But mainly, the argument makes no sense. If you really want tax reform, you shouldn't care whether it comes all in one bill or piecemeal.

Nice catch!