From Senator Tom Coburn, on whether he’d rather raise revenue by increasing rates on the rich or by closing loopholes on the rich:
Actually, I would rather see the rates go up than do it the other way because it gives us a greater chance to reform the tax code and broaden the base in the future.
Coburn is a diehard conservative, but he’s also been off the reservation on taxes for a while, so this isn’t a huge surprise. Still, I think he’s right, and I have a feeling that even some House Republicans might eventually agree with him if they think this through a bit.
There are two ways to come at this. First: which is simpler and easier, raising rates or closing loopholes? I’d say raising rates is easier, and if it’s done now it will make it harder to raise them again in the future. This means that if Democrats want to soak the rich again, they’ll have to do it via closing loopholes, which is a harder lift.
Second, there’s Coburn’s point. If you want to have any chance at all of broadening the base and lowering rates in the future, you can’t close loopholes now. You need to leave them there as bargaining chips. Tax reform will be more likely if rates are higher (making them easier to lower) and loopholes are all still intact (giving you plenty of stuff to close in return for lowering rates).
If you’re a slave of Grover Norquist and hellbent on never raising revenue in any way at all, none of this matters. But if you’re smart enough to pound sand, you know that raising revenue is inevitable eventually. And if it’s going to happen eventually, Coburn is right: you’re probably better off just giving in on the higher rates now. It makes further hikes less likely and makes conservative-friendly tax reform more likely. As a bonus, it also removes the stigma of defending the rich at all costs, even if it means depriving the middle class of a tax cut. That might not be so bad for the Republican Party’s tattered image.