Debt Debate: Wiggle Room in Anti-Tax Pledge?

ABC's Z. Byron Wolf ( @zbyronwolf ) reports:

Here’s what could be a tectonic development in the debt debate today and perhaps a glimmer of hope for a grand bargain to deal with the nation's annual deficits - some wiggle room in the pledge not to raise taxes.

The Washington Post Editorial Board asked Grover Norquist if politicians failing to extend the Bush-era tax cuts would violate his Americans for Tax Reform pledge against new taxes, which most Republicans have signed onto and hold sacrosanct.

“Not continuing a tax cut is not technically a tax increase,” Norquist told the Post editorial board.

There is an important distinction here. Norquist is not saying he’s going to support some sort of revenue-raising, tax hiking deficit reduction proposal. But for him to suggest that raising $4 trillion in tax revenue by allowing the Bush tax cuts to expire does not break the tax pledge is interesting indeed.

By mid-morning Norquist was on cable TV clarifying his stance.

"It wouldn't pass the laugh test to go to the American people and tell them you just allowed $4 trillion in higher taxes by allowing the 2001, 2003 lower rates to lapse and tell people that's not a tax increase. It clearly would be a dramtic increase on taxes," he said during an interview on MSNBC.

"How you get into CBO scoring is a different issue in terms of taxes lapsing," he said.

"There are certain things you could do technically and not violate the pledge, but the general public would clearly understand is a tax increase," he said.

"So I can be clear - Americans for Tax reform would oppose any effort to weaken, reduce or not continue the 2001, 2003 Bush tax cuts and in fact any changes in taxes should be kept separate from the budget deals."

Democrats are crowing that the distinction, however small, between breaking the pledge and increasing taxes will help them pass a more sweeping deficit reform deal that would include revenue measures.

But it is not clear how this development will or could impact the debt ceiling debate. Norquist is skeptical of the " Gang of Six " proposal. His statement Tuesday about that potential debt deal hatched by the three Republicans and three Democrats read: “It is a mistake to invest one’s hopes or fears while the ‘plan’ remains unclear and subject to change by a Senate Finance Committee selected by Democratic leader Senator Harry Reid (D-Nev.).”

There is a lot of disagreement in Washington about whether the "Gang of Six" proposal raises taxes or lowers them. The non-partisan Congressional Budget Office says that extending the Bush-era tax cuts is itself tax cut because they are scheduled to expire next year. Republicans have said that extending the tax cuts would be extending current policy and should not be considered a tax cut.

So the Gang of Six proposal, which would lower most people’s overall tax rates but do away with loopholes like mortgage deductions means either a $1.5 trillion tax cut over ten years according to CBO or a 1 trillion tax hike according to most Republicans. Its a matter of perspective.

But there are some high profile Republicans – tax pledge signers like Lamar Alexander, for instance – who are looking seriously and endorsing at the “Gang of Six" proposal. The Republican members of the "Gang of Six" are all pledge signers.

Read more bout the Gang of Six.

"This is a serious, bipartisan proposal that will help stop Washington from spending money we don't have, and I support it,” the Senate’s number three Republican, Senator Alexander said in a statement this week.

Don’t look for most Republican leaders to suddenly embrace a plan that raises taxes.

“Americans have seen what government does with new tax revenue: they waste it on things like turtle tunnels,” said Senate Majority leader Mitch McConnell on the Senate floor this morning. “until Washington can prove that it’s responsible with our tax dollars, we shouldn’t be sending it more of them.”

The tax pledge has been shown to be elastic in the past. In 2009, when Congress voted to tax the bonuses of AIG executives, Norquist determined that would not break the pledge (either before or after) it became clear that 85 Republicans in the House would vote for the special tax. Read more about that here.

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