In a Washington Post article from February 2, 2009 (“Democrats Set High Goal of Sweeping Fiscal Reform as Senate Opens Stimulus Debate, Sacrifices Become More Urgent”), it’s speculated that now might be the time for bipartisan, long-term fiscal compromise. In the 110th Congress, the model for this compromise was S. 15, the “Stop Over Spending Act of 2007,” sponsored by Senator Judd Gregg (R-NH) and twenty-six of his colleagues. S. 15 was and remains a fatally-flawed bill which will guarantee an annual income tax increase.
S. 15 would require the President to transmit to Congress for an up-or-down vote a list of spending cuts and tax increases. It would create a point of order against raising income tax rates, but that’s cold comfort for those who see S. 15 as little more than a series of annual income tax hikes.
Some may object that the tax hikes recommended by the President must be “targeted.” However, Section 1021(g)(9)(A) defines “targeted” as “any revenue provision that has the practical effect of providing more favorable tax treatment to a particular taxpayer or limited group of taxpayers when compared with other similarly situated taxpayers.” In the real world of Washington politics and budget fights, this language could be used to justify virtually any income tax increase.
In addition, Section 212(b)(4) of S. 15 provides extra money ($1.885 billion over three years) to the IRS for an “enhanced tax enforcement initiative” to confront the socalled “tax gap.” In fact, this money would be used to intimidate taxpayers into making tax planning assumptions consistently in favor of the tax collector. Going after the “tax gap” is not a way to improve compliance, which is already very high. It’s a way to intimidate taxpayers into waiving their legitimate tax positions when dealing with the IRS, and thereby increase tax revenue through the back door.
Thirty-four United States Senators from both parties have signed the Taxpayer Protection Pledge to their constituents and the American people. In so doing, they promise to “oppose any net reduction or elimination of deductions and credits, unless matched dollar-for-dollar by reducing marginal income tax rates.” Support of S. 15 or any similar “grand compromise” is inconsistent with the Taxpayer Protection Pledge signed by these 34 senators.