Indecipherable Differences

On Capitol Hill the Republicans and Democrats have arrayed themselves in opposition to each other on how to deal with the "fiscal cliff".  It's hard to believe that we were so recently, and so pleasantly, unfamiliar with the term "Fiscal Cliff".  As of this writing Google finds 35.8 million references to the term, and here I am adding another.

One of the key sticking points for arresting our plunge over the cliff involves the manner of increasing revenue for the federal government.  The President and the Democrats want to raise the marginal rate on top earners.  The Republicans want to do away with tax "loopholes" for top earners.  As they jockey for the upper hand and make claims of standing firm on principle, one might be led to believe that there is some stark contrast between the positions of the two.

The politicians have already decided that taxes are going up on the top earners.  If your taxes go up, you don't really care if they go up because of a change in the marginal rate, or if they go up because a deduction has been taken away.  Spending more money on taxes this year than you spent last year is just a tax hike.  It seems that the kabuki theater is simply designed to impress the masses with a violent agreement between the two sides to raise the tax rates on top earners.  It's disappointing that the folks in Washington think the people might fall for it, and it's even more disappointing to consider the fact that the people might fall for it.

As a connoisseur of irony I have to at least briefly consider the possibility that this violent agreement may actually lead to an impasse that ultimately results in a plunge over said cliff.  Such is the childishness we see in Washington today.  In their "me too" rush to raise taxes the House Republicans are missing another opportunity to illustrate some actual contrasts between the liberal/conservative world views.  Lost in the discussion is the goal of the exercise; is the goal to raise taxes, or is the goal to raise revenue?  Conservative efforts to maintain a distinction between the two in recent decades are now being marginalized; to say nothing of the distinction between deductions and loopholes.  It is an understatement to say that the adoption of the "tax = revenue" and "loophole = deduction" left-speak by the House Republican leadership is disappointing.

President Obama has made it clear that he believes the tax rates should go up for top earners.  He has also made it clear that he sees this as an exercise in fairness, at least as much as an exercise for increasing revenue.  If taxes are going up on top earners (and they are), it isn't clear why the Republicans would insist on being tied to it with their own peculiar flavor of a tax hike.  It would seem more appropriate for the Republicans to offer a plan of cutting the marginal rate for the those in the middle of the income spectrum.  Such a plan would address the Democrat demand for fairness, and provide at least the potential of some increased economic activity in the area of middle income small businesses.  If a compromise on some level of rate increase for top earners is required, let the President own it while Republicans champion a cut for the middle class.  Splitting the difference between a cut for the middle class and the already inevitable tax hike for the top earners provides a much better opportunity for the Republicans to illustrate that they're capable of more than quibbling over the minutiae of how to raise taxes on top earners.