Speaking of Tax Reform" Harry Reid Just Says no to Revenue Neutrality

     We've discussed tax reform lately, and just yesterday I mentioned that since the mid-70s it's been something that's only been of interest to conservatives.

      However, the same day I wrote about this Harry Reid has laid down some criteria for any tax reform-he's not interested in revenue neutral reform. His tax reform proposal is to raise $975 billion. This is a very good development. The Dems have totally turned around the narrative of 2011-between their new resolution to not accept the strait jacket of revenue neutrality and the President's strong speech on Wednesday that deficit reduction is not the principle means of getting the economy back to where it should be. 

     http://www.nytimes.com/2013/07/25/us/politics/obamas-economics-speech-at-knox-college.html?_r=0

     It looks like the Democrats have taken Jared Bernstein's warnings against neutrality to heart 

     http://diaryofarepublicanhater.blogspot.com/2013/07/tax-reform-1986-and-better-mousetrap.html

     Harry Reid is not only opposed to neutrality, he says it 'can't even be close to neutrality. 

     "Mr. Reid's comments restated Senate Democrats' position on a tax overhaul but showed again how hard it will be to bring the parties together to rework the tax code, a tentative effort that is still in its earliest stages. Most Republicans oppose raising new revenue. Others say any new revenue must be used to offset the cost of lowering other tax rates, rather than to fund government programs."

    "We need tax reform, but it has to be under the total understanding that it can't be revenue-neutral," Mr. Reid said. "It can't be even close to revenue-neutral. There has to be significant new revenues." Lending force to his comments, three other members of the Senate Democratic leadership accompanied him at the press conference where he spoke.

     http://online.wsj.com/article/SB10001424127887324110404578628032715502980.html

    It's refreshing to see the Dems aren't drinking the Coolaid. The way the Republicans want to do this is in general terms say we should lower rates in exchange for closing loopholes. However, they never name the loopholes-and never will. So what we actually get are tax cuts for the rich now for undisclosed revenue raisers through unnamed closed loopholes later. 

    Of course, if this revenue is not raised then it's 'Oh my, look at that deficit and mounting debt! We're going to have to do some deep government cuts so we can go back to living within our means.'

    So between Reid and the Democrats demand for raising revenue and the President's 'pivot' from austerity to cut deficits to economic growth the Dems have gotten out of the Simpson-Bowles straitjacket and are well on their way to reversing 'starve the beast'-which is what Bush's tax cuts were about. The idea is always that if there's no revenue there can't be any spending. 

    Yesterday's words by Reid was also about warning Max Baucus not to undercut the Dems on this. Bacus and the top Republican on the Finance Committee, Orrin Hatch tried to make Thursday the deadline for tax reform ideas. 

    Reid made it clear that this is 'not even close' either. Baucus says that in principle he agrees that there should be some level of a revenue increase in the tax reform bill. Still he immediately said that $975 billion is too much. 

    "Mr. Baucus said a tax-overhaul package would raise additional revenue but also that "there will be a compromise, and we'll take it from there." Mr. Baucus played down the chances that Mr. Reid would refuse to schedule a vote on a package that raised significantly less than $975 billion."

       Surely Mr. Baucus is familiar with negotiation. If you think the number should be less than $975 billion but more than zero-the GOP's preference-it still makes sense to start closer to $975 billion than zero. If you split the difference already then it's already tilted to the GOP before it starts. Dems are letting Baucus know not to cut the party's effort off at the knees before it's even started. 

A senior Senate Democratic aide said the party leaders made such a forceful statement about their desire for significant tax increases to pressure Mr. Baucus not to stray too far in his bid to build bipartisan support for such legislation. The aide said Mr. Baucus hadn't consistently insisted that the bill be revenue-neutral, but neither has he embraced revenue-raising goals as high as other Democrats want.

       ""He's going too far away from his caucus," the aide said."

        I've debated in the past whether tax reform is worth it or not. If it raises significant revenue-after the amount lost from the Bush tax cuts-the CBO puts the amount of revenue lost at $3.6 trillion through 2012-then tax reform is an idea who's time has come.