Despite Democrats' intransigent, no-way-no-how screeching about John Boehner's "Plan B," House Republican leaders are pressing forward with the option behind the scenes. Those efforts received an important boost today when Grover Norquist's Americans for Tax Reform released a statement affirming that the potential plan would not violate the group's oft-cited tax pledge:
ATR has consistently maintained that individual Members of Congress make a pledge to their constituents to oppose and vote against tax increases. The House this week will vote on a tax bill. This legislation—popularly known as “Plan B”--permanently prevents a tax increase on families making less than $1 million per year. Republicans supporting this bill are this week affirming to their constituents in writing that this bill—the sole purpose of which is to prevent tax increases—is consistent with the pledge they made to them. In ATR’s analysis, it is extremely difficult—if not impossible—to fault these Republicans’ assertion. In particular, in this Congress the House has already voted twice to prevent any tax increases on any American. When viewed with this in mind, and considering this tax bill contains no tax increases of any kind—in fact, it permanently prevents them—matters become more clear. Having finally seen actual legislation in writing, ATR is now able to make its determination about a legislative proposal related to the fiscal cliff. ATR will not consider a vote for this measure a violation of the Taxpayer Protection Pledge.
ATR has hastened to clarify that this press release doesn't represent an endorsement of any piece of legislation, but it does provide cover for many conservative pledge-signers in the House. Other conservative activist groups -- such as Heritage Action and the Club for Growth -- continue to adamantly oppose "Plan B." I think it's far from ideal, but the Wall Street Journal's editors make a compelling case that a scaled-back option like this would probably end up being far preferable to any Obama-endorsed "deal" in the final analysis:
Mr. Boehner is certainly in a tough spot, with tax rates set to rise on January 1 if Congress fails to act. His fellow Republicans haven't helped by whining about their lack of "leverage" and publicly negotiating with themselves over the terms of their tax surrender. We think they have more leverage than they believe if they are willing to fight on taxes into next year. But if they're not, at least they shouldn't associate themselves with a deal that increases spending and taxes with little or nothing tangible in return. Let Mr. Obama own the tax increase and its measly 7.5% annual reduction in a $1.1 trillion deficit. Let the sequester take effect as planned, which at least means some spending restraint. Then engage Mr. Obama next year in trench warfare over spending and the debt limit as voters figure out that soaking the rich doesn't begin to solve the problem. A bad budget deal is worse than no deal at all.
Indeed. A House leadership aide emails to inform me that "Plan B" does, in fact, make the middle class tax rates permanent, which lends this contingency plan some added appeal. Here's the Boehner/Cantor pitch:
Here's what the House “Plan B” bill does – and doesn’t – do. According to the House Ways & Means Committee, the House Plan B bill:
-- Does not raise taxes. It is a net tax cut that prevents a $4.6 trillion tax hike on January 1
-- Permanently extends income tax rate cuts for Americans making less than $1 million; 99.81% of all taxpayers
-- Permanently extends the current estate and gift tax ($5 million at 35 percent and indexed for inflation)
-- Permanently extends section 179 expensing for small businesses ($250,000 and indexed for inflation)
-- Permanently stops the Alternative Minimum Tax (AMT) from hitting more middle class families
-- Permanently extends parity for capital gains & dividend taxes; prevents dividend taxes from being taxed at highest rates
-- and does not include anything on the debt limit or other non-tax policy items.
Remember, Speaker Boehner’s rule on the debt limit still applies: spending cuts must exceed any debt limit increase. With tax rates set to rise on everyone on January 1, it’s important to have “a backup plan that makes sure that as few American taxpayers are affected by this increase as possible,” said Speaker Boehner. That’s exactly what “Plan B” will do.
Sound good, conservatives? Meh. Not exactly. But it still may be less bad than the alternatives. The aide frames things this way:
[Plan B] may the best possible outcome absent a serious proposal from Obama. Permanent extension on 99.8% of rates, death tax, AMT, etc. If you take it in three different silos - taxes, spending, debt - this is as good as we'll get on taxes. Sequester still kicks in on spending (not ideal but a trillion in cuts remain) and we deal with debt when we approach limit.
In other words, Republicans would prevent the vast, vast majority of fiscal cliff tax hikes from kicking in, they'd make 99 percent of the lower rates permanent (not just an extension), they'd lock in the sequester's deeply imperfect but real spending cuts, and they'd gear up for another debt fight in 2012 (with "fair share" demagoguery mostly off the table). The bad news is that they'd essentially be giving up on that very top bracket, which includes successful small businesses -- even though they wouldn't technically be signing on to a tax hike. It's also an open question as to whether Democrats would ultimately relent and pass the bill. If Republicans do end up passing plan B -- and if Boehner isn't very close to negotiating a much, much more attractive package -- it would be imperative for them to hold a big press conference and then leave town. Final offer; your ballgame now, Democrats. I quoted this earlier, but Allahpundit has the optics right:
Boehner could turn up the heat on O even further by dropping the threshold for new taxes from millionaires to households that earn more than $400,000 a year. That was the cut-off that Obama himself proposed yesterday, remember; he’d be giving O exactly what he asked for and then daring him to veto it or the Democrats to block it. He could even hold a splashy “you win” presser before skipping town for Christmas, denouncing the bill as a piece of crap that’ll hurt the economy but one which the House feels obliged to pass because it’s the only way to stop Obama from forcing the country over the cliff. If Democrats respond by refusing to take yes for an answer and blocking the bill, then the economic chaos when we fall off the cliff is entirely on them.
Would Democrats have the stones to rebuff a fiscal cliff-averting bill that serves up their dream of tax hikes on "millionaires and billionaires" as the fiscal clock expires? We may find out soon enough.
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