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Should the GOP reach a tax deal with Obama?

Andrew's Assessments

By Andrew Geisler, For the Miami Student

President Obama's budget proposal for the year rolled out this week. This year's proposal, like the rest have been, is, as the New York Times termed it, "more utopian vision than pragmatic blueprint." But one area where the president is clearly interested in engaging the Hill for a deal is tax policy.

Don't let the top lines fool you. Yes, his budget proposes a $1.5 trillion increase in taxes over the next 10 years. When you look particularly in the area of corporate taxes, the White House has set down their initial markers to get a deal done.

Even with the White House's apparent interest in working, does it really even make sense for Republicans in Congress to work with the president on this?

Consider the president and his party's extreme position of political weakness currently. As the excellent Politico Capitol Hill reporter David Rogers wrote in his piece on the budget, this plan "is best understood as the opening bid in hostage negotiations with the Republican Congress."

The Republican party, with its control over both Houses of Congress and an increasingly lame duck president, may never be in a better position to actually sit at the table and hammer out a tax deal.

There has been talk of rehabbing our increasingly complex and inefficient tax code for much of the current administration. Instead of actually getting a deal done, both parties - though mostly Republicans - have been waiting for the perfect time to consider negotiations. Before the 2012 election, Republicans wanted to wait and see if Mitt Romney would be president (you would think a review of every poll but Romney's own internals could have told you, but I digress) to get an advantageous deal.

The politics of tax policy is simply always going to be a huge political loser. In fact, if Republicans are to wait until 2017 to do a tax deal - holding out for a GOP administration - they will get killed for it politically, no matter how it washes out. Big tax and budget deals have ruined presidencies (see Bush, George H.W.) and, since they're always going to make someone mad, they can lead to serious political retribution from the voters unless it's just a giant unpaid-for tax cut.

We don't get enough revenue to cover our expenditures, but we also collect far too much of our revenue from small business. Our last major tax code clean up happened almost 30 years ago at the end of the Reagan administration. Since then, all kinds of goodies have popped up to ensure that corporations, with all of their political influence, pay an effective corporate tax rate of around 12 percent, per a 2010 GAO study.

Small businesses tend to file their taxes somewhat similarly to an individual and have less political influence. They pay an average rate of around 30 percent. The difference here is striking and problematic. People love to talk about how our corporate tax rate is the least competitive in the world at 39.1 percent, but notice nobody really ends up paying that.

Much of our political debate over taxes is also deeply depressing. One side obsesses over marginal rates while the other thinks about ways to raise them. It would be smart for Capitol Hill to operate as a true, unified front against a White House on the other side and try to get at least corporate taxes off the table.

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Tax deals have been done before and they'll be done again. All it will require is a collective willingness in Washington to step it up and get it done.

Sure, it appears unlikely, but when it comes to taxes, it always does. The GOP should be smart enough to see the political state of play for what it is and try to get a big tax deal done, and soon.