Senator Minority Leader Mitch McConnell argued on Sunday that, with the passage of the fiscal cliff deal, the “tax issue is finished” and that instead of raising more revenue we need to confront our “spending addiction” in order to reduce the deficit. What McConnell failed to mention was that lawmakers in Washington have already passed trillions of dollars in deficit-reducing spending cuts, while at the same time enacting trillions of dollars in deficit-increasing tax cuts.
Perhaps the biggest flaw in McConnell’s logic is the idea that lawmakers have already raised a substantial amount of revenue. According to the Joint Committee on Taxation (JCT), the official revenue estimators for Congress, the fiscal cliff deal will actually reduce revenue by $3.9 trillion over the next decade. The deal raises revenue only if compared to what would happen if Congress had extended all the tax cuts (which were set to expire by law at the end of 2012).
If you accept this baseline as touted by the President and others who supported the deal, the fiscal cliff resolution can be said to be a $620 billion tax “increase” on the rich. But even if you accept that logic, it is nonetheless true that the substantial spending cuts already enacted in order to reduce the deficit justify raising a lot more revenue.
According to the Center for American Progress, since fiscal 2011 nearly $3 in spending cuts were enacted for every $1 in revenue raised. In other words, even under the artificial baseline that allows us to pretend Congress just raised revenue, we would need to raise roughly $1.2 trillion in additional revenue before even reaching parity with the level of spending cuts already implemented.
Anti-tax lawmakers like Senator McConnell claim that spending is so out of control that we can’t possibly raise enough revenue from taxes to reverse the growth of the debt. But, according to the non-partisan Congressional Budget Office (CBO), the long-term debt crisis is largely driven by the persistence of the Bush tax cuts, rather than spending. In fact, the CBO’s long term budget outlook found that had Congress done nothing and simply allowed all the Bush era tax cuts to expire, the debt would have been on track to begin dropping substantially starting in 2015 and over the coming decades.
There is also the related matter of fairness in our tax code. The reality is that the fiscal cliff deal did very little to change the tax rate paid by wealthy investors like Warren Buffett or Mitt Romney and actually included an extension of many of the corporate tax breaks that allow companies like General Electric to avoid taxes altogether. As we’ve explained, these corporate tax breaks are likely to be extended again and again and end up costing more than was saved by ending some of the tax cuts for the rich.
Considering it’s centrality to fixing the debt and improving fairness, the “tax issue” is certainly not finished. It’s really just getting started.