No deal that in­cludes tax in­creases

The Washington Times Weekly - - Editorials -

The rough out­line of what might turn into a work­able debt ceil­ing bar­gain ap­pears to be com­ing to­gether. House Ma­jor­ity Leader Eric Can­tor moved the ball for­ward on July 6 by iden­ti­fy­ing a point of agree­ment with the White House. “If the pres­i­dent wants to talk loop­holes, we’ll be glad to talk loop­holes,” he said, but the changes “should be cou­pled with off­set­ting tax cuts some­where else.” The Vir­ginia Repub­li­can added that “pref­er­ences in the code aren’t some­thing that helps eco­nomic growth over­all.” Broader re­form that stim­u­lates growth is ex­actly what we need.

Both sides have agreed in prin­ci­ple to more than $2 tril­lion in spend­ing cuts, but Pres­i­dent Obama and Se­nate Ma­jor­ity Leader Harry Reid in­sist on sav­ing face by elim­i­nat­ing rel­a­tively mi­nus­cule tax breaks on oil com­pa­nies, boat man­u­fac­tur­ers, horse own­ers and air­craft pro­duc­ers.

The Ne­vada Demo­crat stuck to his talk­ing points last Wed­nes­day, say­ing, “Democrats want to end spe­cial tax breaks for the mil­lion­aires and bil­lion­aires who are lucky enough to be able to af­ford pri­vate jets and yachts.”

The Democrats call any boat for which an Amer­i­can takes a de­duc­tion a “yacht.”

In fact, most peo­ple who own boats are mid­dle-class, with 75 per­cent of all boat own­ers hav­ing a house­hold in­come of less than $100,000, ac­cord­ing to Jim Cur­rie of the Na­tional Marine Man­u­fac­tur­ers As­so­ci­a­tion. “It’s all rhetoric that you are sub­si­diz­ing rich peo­ple,” Mr. Cur­rie told The Wash­ing­ton Times. Clos­ing the mort­gage de­duc­tion on boats “wouldn’t be mean­ing­ful; it will prob­a­bly get lost in the round­ing off,” he ex­plained.

The $31 bil­lion boat-build­ing in­dus­try sup­ports 135,000 jobs and is al­ready strug­gling from the eco­nomic down­turn.

It’s true that the tax code is lit­tered with spe­cial-in­ter­est de­duc­tions, and get­ting closer to a flat­ter rate sys­tem is ideal. Se­nate Mi­nor­ity Leader Mitch McCon­nell coun­tered the Demo­cratic dem­a­goguery by say­ing that “tax re­form needs to oc­cur again; it hap­pened 25 years ago, but lots of pref­er­ences have crept back into the code.”

The Ken­tucky Repub­li­can also said that “to cherry-pick items in the con­text of this cur­rent ne­go­ti­a­tion with the White House strikes me as pretty chal­leng­ing.”

It’s un­likely that real re­form will hap­pen as long as Mr. Obama and Mr. Reid are fix­ated on small-time po­lit­i­cal gim­micks. In ne­go­ti­at­ing with the White House, Repub­li­cans should only cede ground on the so-called loop­holes in ex­change for bring­ing down tax rates in ar­eas that will stim­u­late the kind of growth our econ­omy des­per­ately needs. On this last ma­jor hur­dle, GOP lead­ers must hold strong against the urge to agree to tax in­creases just to get the deal done.

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