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Breaking the Back of the GOP Base

The opinions expressed by columnists are their own and do not necessarily represent the views of

There are three "keystone deductions" in the IRS code that matter more than all others to Americans who itemize deductions.

They are keystone deductions because they help the middle and upper middle class and they promote extraordinarily important social policies which have long been at the center of the traditional values held by most Americans.

The first is the deduction for contributions to qualified charities, such as hospitals, high schools and colleges, charities serving everyone from children to the homless to the old and infirm, and of course churches of every denomination.

The second keystone deduction allows homeowners with mortgages to deduct the interest on that mortgage from their income before calculating the ta they owe. This deduction encourages people to buy houses and is in fact a key component of the value of every house in America. The deduction is a valuable part of every home. If it is ended or limited, the value of every house in America falls, even if that home has no mortgage on it. The same downward pressure on home values occurs even if the deduction is only limited for some houses or some owners --say second houses or homes costing more than $500,000. The housing market doesn't distinguish between who owns what, but cares mostly about what buyers are willing to pay, and a lower or eliminated deduction means fewer buyers which means falling house values.

The third deduction allows taxpayers to deduct from their income before calculating their federal tax all the state and local taxes they paid in the previous year. Americans in high tax states, already staggering along under punitive tax regimes, would be smashed by any limit on this deduction. Some would call such a move a last straw, and leave the already reeling states like California, but most would simply be trapped where their jobs and (suddenly less valuable) homes are, paying higher and higher taxes.

Thus a Pennsylvania family of six with two kids in college, with a mortgage that has been refinanced to help pay tuition, but which still makes a tithe to their church is looking at a triple whammy tax hike if these deductions go away or are limited. So would millions of other Americans.

Which is why reaction ranged from shock to anger when two Republicans on the so-called Supercommittee proposed attacking those very deductions this week. Pennsylvania's Senator Pat Toomey and Texas Congressman Jeb Hensarling, both credentialed conservatives, stunned their center-right supporters and Republicans across the country by proposing a plan to raise hundreds of millions of dollars of new revenues financed by the assault on these keystone deductions.

The AP's Stephen Ohlemacher described the Toomey-Hensarling ta hikes this way:

A GOP plan to raise taxes by $290 billion over the next decade would limit deductions for mortgage interest, charitable donations and state and local taxes as part of a deficit-reduction deal. Some workers could also see their employer-provided health benefits taxed for the first time, though aides cautioned that the plan is still fluid....

The top income tax rate would fall from 35 percent to 28 percent, and the bottom rate would drop from 10 percent to 8 percent. The rates in between would be reduced as well. A GOP congressional aide said the plan is designed to raise taxes on households in the top two tax brackets. That would affect individuals making more than $174,400 and married couples making more than $212,300.

The plan has already split the Congressional GOP, but its dire consequences are just beginning to be felt across the country. I have spent much of this week's radio shows talking to experts and callers about the Toomey-Hensarling tax hikes, and while an occasional supporter will speak in favor of all or part of its provisions --former Utah Governor Jon Huntsman for example-- the vast majority assailed the plan as bad policy, horrible politics and, crucially, a breach of faith with voters who sent the GOP back to Congress in November 2010 with a mandate to cut spending, not raise taxes and in the process of raising taxes, changes many of the crucial rules by which the country has operated for decades.

On my show Rick Santorum called the proposed package another "Read my lips" moment, harkening back to the promise which the first President Bush made and then disastrously broke in a "big deal" with Democrats 20 years ago.

Callers were fuming. One retired sheriff living in Calfiornia berated me for leading him to contribute to Pat Toomey's 2010 Senate campaign. Many others simply stated they would lose their house to which they were barely hanging on if the deduction was lost. A wise accountant friend laughed at the idea that slashing the charitable deduction wouldn't dramatically impact high income giver's giving. And when contributions fell, so would the services delivered by those groups and employment within the vast not-for-profit sector.

Where could such a horrific idea have come from? Why, from three economists of course, all from the National Bureau, and beloved by the purists at the Wall Street Journal and the Club for Growth.

Good for them. Let them put their plan before the GOP Convention and have it adopted as a platform.

Let them ask Speaker Boehner to amend, republish and then campaign on a revised Pledge to America, because the 2010 version said nothing about these radical measures.

That is the biggest problem with the plan: The new Congress was sent to D.C. to represent the cut spending/shrink government movement in the country, and it instead has produced a secret committee that is hurtling towards a massive tax hike --authored by Republicans!

Some Republicans argue it is either this or the automatic "sequestration" built into last summer's debt ceiling deal which would hammer defense spending with an unimaginable $600 billion in more cuts on top of the hundreds of billions already unwisely slashed from DoD's funding.

But the sequestration doesn't take effect until 2013, and there is an election between now and then which could empower a new president, with a new GOP majority in the Senate working alongside a the GOP majority in the House, to actually reform entitlements and control spending without raising taxes or slashing defense.

If the GOP that is already inside the Beltway embraces tax hikes, especially this ruinous trio of deeply damaging hikes, the message will be clear to many millions of voters: You cannot trust Republicans who promise to cut spending and keep a lid on taxes.

Not even for one year.

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