White House claims debt ceiling plan passed by House violates no tax hike pledge
Christian Datoc
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The White House rolled out a new argument that lawmakers who vote for House Speaker Kevin McCarthy‘s (R-CA) debt limit proposal are violating a long-held conservative pledge against tax increases shortly before the measure passed, though the organization behind the pledge disagrees.
McCarthy’s plan, the Limit, Save, Grow Act of 2023, would raise the debt ceiling by $1.5 trillion or through March 31, 2024, whichever comes first. The bill also repeals a host of green energy tax credits included in President Joe Biden‘s Inflation Reduction Act, which White House officials say will violate the “Taxpayer Protection Pledge,” popularized by Americans for Tax Reform President Grover Norquist over the past four decades, and McCarthy’s own rejection of tax hikes as a means of reducing the deficit.
“We’ve got a lot of revenue. We just have a spending problem,” McCarthy said following a meeting at the White House with Biden when asked about new potential federal offsets to balance the budget. “And that’s where I want to … find common ground.”
“Months after promising not to raise taxes, House Republicans are voting for a middle-class tax increase. Every House Republican who votes for Speaker McCarthy’s bill is voting to raise taxes on working families when they buy efficient appliances, electric vehicles, and other products that would lower utility bills, even as they continue to push for massive tax giveaways for the super-wealthy and special interests,” White House spokesman Michael Kikukawa told the Washington Examiner. “The president’s budget keeps his promise to not raise taxes on anyone making less than $400,000 a year. Instead of raising taxes on hardworking families and slashing programs they rely on, Republicans should join the president in making the rich and special interests pay their fair share.”
The Taxpayer Protection Pledge originated in 1986 when Norquist lobbied lawmakers in support of former President Ronald Reagan‘s tax agenda.
In 2011, Norquist claimed that “if you want a politician to make a commitment and you want it to matter, it can’t be four paragraphs long, I can’t have moving parts — you can’t remember what’s in it.”
Toward that end, the pledge reads:
I, ______, pledge to the taxpayers of the ______ district of the state of ______ and to the American people that I will: One, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and Two, to oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates
Former President George H.W. Bush, vice president under Reagan, notably did not sign the tax pledge and would go on to lose his 1992 reelection bid after raising taxes in office despite pledging on the 1988 campaign trail not to do so.
Despite the White House’s claims, Americans for Tax Reform does not believe McCarthy’s bill violates the pledge.
ATR spokesman John Kartch did not say if the organization would conduct any modeling to determine the tax impact of McCarthy’s plan. He instead pointed the Washington Examiner to a letter House Committee on Ways and Means Chairman Jason Smith (R-MO) sent to McCarthy on Wednesday disputing the idea that Inflation Reduction Act green energy provisions are tax credits at all.
“With ‘direct pay’ and ‘transferability’ features, Democrats designed this ‘green’ corporate welfare to function like direct government spending, rather than traditional tax credits that reduce taxes owed,” Smith wrote. “As of today, we are still working to better understand how high the price to American taxpayers may become, but much of this can and should be treated as direct outlays to the federal government.”
Ben Ritz, the director of the Progressive Policy Institute’s Center for Funding America’s Future, disagreed.
“A lot of the [Inflation Reduction Act] credits have hard income camps, and so those are going to middle-class people. If you look at how Republicans have defined tax increases through the no new taxes pledge, and then every fiscal negotiation for the last decade, by that standard, there is no way McCarthy’s debt limit bill is not a tax increase,” he said in an interview with the Washington Examiner. “And because of how Democrats wrote the IRA, there is no way that that tax increase does not fall on middle-income people. There are going to be a lot of middle-income people who have higher taxes if the McCarthy debt limit bill passes.”
“People are making decisions now about what kind of car they’re going to buy expecting this credit,” he continued. “So if a tax credit is going to be in effect for this tax year and I bought one of the cars that’s eligible, and then in November, Congress appeals that tax credit, they are making my purchase more expensive. And so that is absolutely a tax.”
Will McBride, vice president of federal tax and economic policy at the Tax Foundation, told the Washington Examiner that while the Inflation Reduction Act tax credits “largely” skewed to higher earners with a “preference for climate-oriented luxury goods,” they do provide a reduced benefit for the “bottom 20% of earners.”
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At least one Republican lawmaker, Rep. Nancy Mace (R-SC), originally stated her opposition to McCarthy’s bill on the grounds that repealing Biden’s tax credits “essentially” raises taxes.
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Mace would come out in support of the bill after a private meeting with McCarthy on Wednesday.