Chris Hildebrand contributed to this post.
Republican Senator Tom Coburn’s (R-OK) recent crusade to define the elimination of tax expenditures as spending cuts, rather than tax increases, achieved its first major victory the other week with the 73 to 27 Senate vote to eliminate ethanol subsidies. Importantly, 33 Senate Republicans (including staunch conservatives, such as Sen. Pat Toomey (R-PA)) courageously joined Coburn to break – or at least weaken – Grover Norquist’s influence on many Republican members of Congress.
Norquist, leader of the conservative group Americans for Tax Reform, has long attempted to fortify traditional Republican anti-tax sentiments by asking all Republican congressmen to sign the “Taxpayer Protection Pledge.” The text of the pledge strictly rejects revenue increases, whether from an increase in marginal rates or a reduction in tax expenditures. The pledge, at its core, is a carefully crafted tool designed to disallow revenue increases in an attempt to limit the size of government, or “starve the beast.” Going against this pledge is deemed a political risk for many signatories, and can thus act as a roadblock to any bipartisan debt reduction compromise, since both revenue increases and spending cuts will be needed to avert the looming fiscal crisis. Some prominent Republicans, however, have begun to chafe at the restrictions set by the pledge. The third-ranking Republican in the Senate, Lamar Alexander (R-TN), said after the vote, “my view is, a good way to reduce the debt is to get rid of unwarranted tax breaks.” Quotes such as this indicate that many Republicans see eliminating certain tax expenditures (which would raise revenue that could be applied to deficit reduction) as distinct from marginal tax rate increases. The adjustment seems to indicate that there may be more room for compromise on revenues moving forward. The Domenici-Rivlin and Bowles-Simpson commissions, in fact, make clear that weeding out the mass of tax expenditures in the code can raise enough revenue to both reduce the deficit and lower marginal rates. Looking at the larger picture, though, The Washington Post’s Ezra Klein rightly points out that ethanol subsidies are not the kinds of tax expenditures that can contribute meaningfully to deficit reduction. Efforts to remove far more expensive and politically sensitive expenditures have not yet gained serious political traction (despite some encouraging poll results). At the end of the day, the ethanol subsidy repeal vote raises hopes that many Republicans are willing to take steps forward on revenues. Likewise, Democrats should meaningfully engage with Republicans on entitlement reform (particularly Medicare), rather than simply using it as a political tool. Both parties must move from their traditional confines and agree on a bipartisan solution. The future of the U.S. economy and our leadership in the world depend upon it.