Skip to comments.The Norquist–Coburn Feud Reignites: Are tax subsidies the same as tax cuts, or are they just...?
Posted on 06/16/2011 7:19:54 PM PDT by neverdem
The NorquistCoburn Feud Reignites
Are tax subsidies the same as tax cuts, or are they just subsidies?
The feud between Sen. Tom Coburn (R., Okla.) and tax lobbyist Grover Norquist came to a head (again) this week as Republicans girded themselves for a potential deal on the debt ceiling. Sparks flew Tuesday when Coburn forced a cloture vote on an amendment to eliminate $6 billion in ethanol tax subsidies. Ethanol, however, was hardly the issue at stake.
GOP leaders have made it clear that Republicans will not support a deal to raise the debt ceiling if it includes tax increases. But as Tuesday’s vote showed, not all Republicans agree on what constitutes a “tax increase.” At issue is the “Taxpayer Protection Pledge” that Norquist, president of Americans for Tax Reform, urges all GOP lawmakers (and any willing Democrats) to take. All but seven Republicans in the Senate — including Coburn — and all but six in the House have signed on. Signers promise to oppose any tax increase as well as “any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.”
Coburn’s amendment eliminated tax breaks for the ethanol industry but did not include any offsetting tax cuts. The Joint Committee on Taxation estimated that his proposal would raise $2.4 billion in new tax revenue over the remainder of the year, which Coburn intended to put toward reducing the deficit. Norquist, therefore, denounced the amendment as a violation of the pledge.
The vote failed, 40 to 59, well short of the 60 needed for cloture, but the fact that 34 Republicans supported the amendment raised eyebrows on Capitol Hill as perhaps a sign that Norquist and his pledge have lost clout in the GOP conference. Coburn certainly touted it as such. “That’s 34 Republicans who are willing to say this is more important than a signed pledge to ATR,” he told reporters after the vote. “I think you all think [Norquist] has a whole lot more hold than I think he has.” Then, in a follow up statement, he added: “Taxpayers should be encouraged that Republican senators overwhelmingly rejected the ludicrous argument that eliminating tax earmarks is a tax increase.”
Norquist vociferously denies this charge, pointing out that ATR gave senators the go ahead to vote yes on Coburn’s measure provided they also agreed to support an amendment by Sen. Jim DeMint (R., S.C.) that would have made up for the lost tax credit by eliminating the inheritance tax. There has been no vote on that measure yet, and it’s not clear when or if a vote will happen, but most Republicans have voiced support. “No one violated the pledge,” Norquist said. “Nobody followed Coburn over the cliff.”
Norquist accuses Coburn of trying to trick colleagues into supporting a tax increase in order to undermine the Republican position in the ongoing debt negotiations. “He’s trying to screw the rest of the Republican party because he is so mad at the world,” Norquist tells NRO. “He didn’t want to get rid of the ethanol tax credit without raising taxes. The important thing in his life was raising taxes.”
In fact, Norquist has been at odds with Coburn ever since the senator voted in support of the Bowles-Simpson deficit commission’s final report, which Norquist describes as “a massive $2 trillion tax hike” and a blatant violation of the ATR pledge. He has constantly criticized Coburn’s involvement in the “Gang of Six” talks, as well as his stated willingness to negotiate when it comes to taxes. Norquist says Coburn’s statements after the vote make it clear that his amendment had nothing to do with ethanol subsidies and everything to do with forcing Republicans to go on record supporting a tax increase — essentially a gateway drug that would inevitably lead to additional increases down the road. “He said, ‘Ha ha, popped your cherry, lost your virginity. Now give me $2 trillion in tax increases,’” Norquist says. “As soon as they voted, he turned around and called them sluts. Guys like that didn’t get second dates in high school.”
And even worse, Norquist argues, the vote played right into the Democrats’ hands by letting them cast Republicans as amenable to tax increases. Indeed, a number of Democrats put out statements to that effect, some spinning it as good for the country and others alleging Republican hypocrisy. “[Coburn’s] willingness to cut special-interest tax breaks for the purpose of deficit reduction is encouraging,” said Rep. Chris Van Hollen (D., Md.), ranking member on the House Budget Committee. Democrats in Massachusetts wasted no time attacking Sen. Scott Brown (R., Mass.) — up for reelection in 2012 — for “breaking promises” by violating the ATR pledge.
Sen. Chuck Schumer (D., N.Y.) jumped at the opportunity to exploit this apparent rift on the right, touting headlines such as “Ethanol vote may signal GOP tax shift” and holding a press call heralding the change. “The mass Republican vote to end ethanol subsidies was a watershed moment that means tax expenditures are fair game in the now ongoing deficit-reduction talks,” he told reporters on the call Wednesday. “The dam is officially broken, the knee-jerk right-wing opposition to get rid of any subsidies is subsiding.”
That said, Coburn had his fair share of supporters who, with varying degrees of subtlety, appeared to split from the Norquist position despite having signed the pledge. “Cutting out special subsidies hardly is the same thing as raising taxes,” said Sen. John Cornyn (R., Texas), who heads GOP campaign operations. Sen. Richard Burr (R., N.C.) added: “Grover Norquist can say what he wants, but I would disagree with him on this.”
“I voted for lower food prices and less federal debt. I’d do that again if I could,” said Sen. Lamar Alexander (R., Tenn.) when asked about his vote on Wednesday. Even freshman fiscal hawk Sen. Pat Toomey (R., Pa.), who called the pledge “a useful tool in uniting Republicans,” acknowledged having “subtle” differences with the ATR president. “I am not interested in raising taxes,” he said. “But I am interested in ending ethanol subsidies.” Toomey added that he also supported DeMint’s amendment.
The Club for Growth, the conservative group that Toomey founded, announced key votes on both amendments, but made clear that its support for Coburn’s amendment was not contingent on any other factors. “Our position is that bad economic policy should be eliminated, regardless of other changes in the tax code,” Club for Growth spokesman Barney Keller writes in an e-mail. “Ethanol subsidies are a travesty and we’re looking forward to seeing their abolition.”
Norquist and his supporters, however, claim that tax issues aside, Coburn’s amendment was a “phony baloney” effort to undo the distortions in the market caused by ethanol production because it fails to eliminate the federal ethanol mandate, which requires that the United States consume 36 billion gallons of “renewable fuels” per year by 2022 — nearly half of which will consist of ethanol. DeMint’s amendment, meanwhile, would strike the mandate. “He deliberately did not fix the ethanol problem,” Norquist said. “This was a pure tax-increase vote.”
According to Senate sources, tensions are running high, particularly as debt negotiations led by Vice President Biden have assumed a greater urgency. GOP leaders have repeatedly insisted that no tax increases will be included in a final deal. However, when pressed by reporters to clarify their definition of “tax increase,” they are conspicuously vague, which could frame this week’s vote in a revealing light. Some Senate aides speculate that a final deal could involve a Democratic compromise on Medicare if Republicans agree to eliminate certain tax loopholes. Others, however, don’t think a deal will include any loophole closings, pointing to Republican statements that such changes should be made only in the context of comprehensive tax reform.
Depending on whom you ask, Senate Republicans have either had enough of Norquist’s ideological rigidity, or are losing patience with Coburn’s quest for bipartisanship. Either way, it seems clear to most observers that the feud has become increasingly personal. “Grover is embarrassed that 34 Republicans essentially told him to take a hike and rejected his narrow and ridiculous interpretation of what the pledge means,” one aide says. “He’s made a calculation that this is an existential threat to his lobbying livelihood. That’s what this is about, one desperate lobbyist.”
Another aide laments Coburn’s newfound willingness to cut a deal with Democrats: “What happened to the old Tom Coburn who said no to everyone?”
Senate Majority Leader Harry Reid (D., Nev.) has scheduled Thursday-afternoon votes on two additional amendments that go after ethanol subsidies, including one from Sen. Diane Feinstein (D., Calif.) that is nearly identical to Coburn’s (in fact, he is a cosponsor). Expect a lot more Democratic votes this time around; party leaders whipped against Coburn’s measure not out of disagreement, but to protest the procedural maneuvering he used to force a vote on Tuesday. Republicans, meanwhile, will presumably vote the same. As for the Norquist–Coburn feud, it’s apparently just getting started.
— Andrew Stiles is a 2011 Franklin fellow.
Politicians have too much pride to repeal laws/taxes, so that pride must be broken by legal, civil ridicules and refusals against politics (including avoidances of personal spending and increases in self-sufficiency). Look at the messes that kind of pride has gotten us into.
This is why we need to do away with all payroll, all corporate taxes and install a national sale tax with no exception. It’s upfront, in the sunlight and a levels the playing field for all.
Corporate welfare must end.
Grover Norquist. Married to a muslim. Agenda setter, organizer, policy maker, lobbyist, fund raiser and overall heavy hitter for the American based, muslim terrorist front group, C.A.I.R. Grover Norquist is one of the most dangerous muslim terrorist sympathizers in our Country.
It is not a tax cut unless it is given to all people in the same tax bracket, not just a favored few.
No one need be merely a taker in this society, for it to function as a vital society, it cannot continue to exist as a nation of supporters and takers. We have way too many takers to support.
While I absolutely agree with the economic principles of an NRST, I oppose it vigorously for reasons of its practical effects. If you think the IRS is invasive now, just wait until they have to enforce an NRST against a burgeoning black market. The Federal government will then be involved in EVERY business transaction. Better think about that.
A credit is not a tax cut. They take the money from everyone and then say if you jump thru all the right hoops we will give you x-amount back. They determine what causes are worthy. In a perfect world they would dramatically lower tax rates and do away with all credits. This would never be done because it would reduce the currency of politicians pandering to their selected targets. That would allow us mere peons to spend and/or donate as we see fit without tax consequences. That would be too much power for the politicos to give up.
His "tax pledges" are bear traps that ignore the complex realities of tax reform. Replace the progressive's income tax with a sales tax or a flat tax and it can be said you've broken your pledge.
Good point. Because the current system is so uneven, any tax reform that attempts to make it flatter and broader will result in higher taxes for those that were freeloading under the old (current) system.
The problem with a single NRST is that it would need to be so high it would destroy itself in avoidance and evasion. This is actually a goal of the FairTax — to be so large that it encourages people to question government spending and clamor for reductions.
Even if you had no exemptions (like education as the FairTax does), and no rebates, and only strove to replace the $2.2T current revenue of the income and payroll taxes, the tax rate would need to be 23% as most people understand sales tax rates or 19% “inclusive” the way the FairTax understands it. That is an awful lot of incentive for black market evasion locally and for legal avoidance by spending outside the country. That evasion and avoidance would cause the tax rate to spiral higher and higher.
A 10% NRST would not incite anywhere near as much evasion or avoidance, but would garner only $1.4T revenue. Couple it with a payroll tax that is paid only by the employer on the total cost of labor instead of only the first $100K wages and doesn’t include the value of benefits at all. The employer payroll tax rate at 9% would garner $1T. A total of $2.4T plus another $300B from fuel, alcohol, tobacco, and mining taxes and royalties, for $2.7T overall. No income tax, no individual payroll tax, no capital gains tax, no death tax, and no corporate tax — and no tax credits, subsidies, or deductions to fight over. That would be a pro-growth tax system.
From 2000 to 2008, GDP went from $10T to $15T and with a truly pro-growth tax system like above, I can see going to $25T by 2020. I think it is possible to grow out of our entitlement spending problems, as long as we hold down the runaway costs to 2-3% per year while GDP grows at 6-7%.
is a board member of the ACU, and from the looks of CPAC's
covered topics and omission of discussion of jihad, it looks as if he exerts enormous
influence over David Keene, the ACU's nominal leader. Norquist and his ally Suhail
Khan seem to be in charge at CPAC - no CPAC event goes on that doesn't reflect their perspective. .
Grover Norquist's troubling ties to Islamic supremacists and jihadists have been known
for years. He and his Palestinian wife, Samah Alrayyes, who was director of
communications for his Islamic Free Market Institute until they married in 2005, are very
active in "Muslim outreach." ..
It was Norquist who ushered these silver-tongued jihadists into the Oval Office after the
worst attack ever on American soil. .
Grover Norquist was on the jihad payroll before and after the carnage and death of
September 11 .
Norquist also introduced Nihad Awad, cofounder and executive director of the Council
on American-Islamic Relations, to President Bush. .
It is no surprise that CPAC 2010, like CPAC 2009, had nothing addressing the war we
are actually engaged in. This is due to the influence of Norquist, Keene, and Suhail Khan,
a CPAC board member. According to Gaffney, Khan "has repeatedly been a featured
speaker at MSA, ISNA and CAIR events" - that is, Muslim Students Association, Islamic
Society of North America, and Council on American-Islamic Relations, three groups
linked to the Muslim Brotherhood, the international Islamic organization dedicated to
establishing the rule of Islamic law and the subjugation of infidels worldwide."
The problem with a single NRST is that it would need to be so high it would destroy itself in avoidance and evasion.
Sorry not true. The current tax rate is hidden in the cost of all goods and services. If a 1.00 item has corporate tax of $.06 (30% of 20% profit) and $.135 payroll tax (45%/item labor cost X 30%) which equals $.185, then the new selling price (with NRST) would be $.815 + $.185 = $1.00 As far as the Black Market. We will always have tax cheats.
‘...legal avoidance by spending outside the country.’ how do you get the stuff back in the country?
It doesn’t matter how much is currently embedded in the cost of products. All that matters is that it be significantly cheaper to buy on the blackmarket. At 23% evasion will be huge.
I also wasn’t referring to people buying abroad and bringing home as legal avoidance. The top 1% of earners earn $2.5T of the total $12.5T personal income, and that income is mostly investment income that doesn’t require a US presence. Those people choose to live in the US because there is no sales tax and they owe income tax to the IRS no matter where they live. So they may as well live here even though they could handle their affairs remotely while living abroad. If they no longer owe income tax, and living outside the country let’s them legally avoid 23% of their money going to taxes, why wouldn’t they do that ?