Tim Kaine, the likely Democratic Senate nominee, was on NBC12 with Ryan Nobles trying to put some daylight between himself and President Obama on at least a sliver of the President’s tax increase agenda. Mr. Kaine boldly announces he wouldn’t raise the capital gains tax, as the President would, but still supports letting the “temporary” Bush tax cuts expire.
Which, if allowed to occur, would result in an increase of the capital gains tax. In some political circles, Kaine’s position counts as a genuine policy difference. The rest of the world calls it a difference of degree, not kind.
But let’s get to this issue of the “temporary” Bush tax cuts. The political nature of “temporary” is the key to understanding why Kaine is able to say — without his eyebrow giving him away — that returning to the Clinton tax rates on capital gains and more doesn’t count as a tax increase.
From Ben Pershing’s WaPo write-up of the Kaine interview, the former governor says:
Letting the Bush era tax cuts expire, even Grover Norquist has said, that’s not a tax increase. The Bush tax cuts in the plan were made temporary, George Allen voted for them to be temporary and they were made temporary for one reason. If you make them permanent, they will completely explode the deficit, so here they are, they’re temporary, they’re set to expire at the end of 2012, and I have supported the element of the president’s plan that would let those tax cuts expire at the top end. That’s not voting for a tax increase.
Grover’s bizarre and contradictory musings aside, the Bush tax cuts are among the more permanent and stable tax regimes the nation has ever had. As the Tax Foundation’s Scott Hodge noted:
While many on the political left rail against the Bush-era tax rates and believe they should be allowed to expire, it is interesting to note that these “temporary” tax rates have been in place longer than the “permanent” Clinton-era tax rates they cut. Indeed, the lower Bush-era tax rates – with a top rate of 35 percent – have been fully in effect for nine years, since the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA or “jeg-tray”) was enacted to accelerate the phased-in rate cuts set forth in the 2001 legislation. By contrast, the Clinton-era rates – with a top rate of 39.6 percent – were in effect for just seven years, from 1994 to 2000.
Ironically, before the Bush-era rates expire (again) on December 31, 2012, they will have been in place for 10 years, which will tie the 1954 to 1963 period (with a top rate of 91 percent) for the second longest period of stability for any set of tax rates. The longest any top rate was in effect was the 17 years between 1965 and 1981, when the top rate was 70 percent.
Hodge went on to explain why the “temporary” tag still applies to the Bush-era cuts, and how this only-in-DC thinking makes Mr. Kaine’s other argument — that the cuts will continue to “explode the deficit” — seem perfectly rational, if deeply deceiving:
To the Washington budget establishment, the projected tax revenues that could be raised from the Clinton-era tax rates are as good as collected. Thus, any difference between those higher estimates and the amount that can be collected under the Bush rates is money that must be “borrowed” to finance the government. This is kind of like the young couple who bought a home for $300,000 and now wants to sell it for $500,000, but think they will “lose” money if the home sells for $450,000.
To recap: Bush’s cuts endure, though they are “temporary,” and because the revenue from long-lived “temporary” rate reductions is calculated under the rules established under the “permanent” Clinton tax overhaul, the reduced rates we’ve had for nearly a decade are classified as borrowing.
If you can keep all that straight, you have a promising career ahead of you on Mr. Kaine’s policy team.
