There is no rate reduction whatsoever in this plan. It's a set of tax hikes, plain and simple. There is no tax reform in this plan. The plan would undermine prospects for long-term tax reform. By voluntarily taking $1 trillion of tax deductions and credits away now to pay for Congressional over-spending, there's $1 trillion less to trade with for lower rates later.
Taxes under this plan would rise to the historical spending level, rather than bringing spending down to the historical tax level. When combined with all other current law tax provisions, the Coburn tax hike would permanently set tax revenues not at 18 percent of GDP (the historical tax average), but at 21 percent of GDP (the historical spending average). The goal of conservatives should be just the opposite--bring spending down to the historical tax average of 18 percent of GDP and balance the budget without raising taxes.
It's now clear Senator Coburn's plan all along was a trillion dollar tax hike. Senator Coburn pretended to care about ethanol (until he was forced to admit he supported the ethanol mandate, the cause of 98% of government-induced ethanol production). In reality, he wanted to lay the groundwork for GOP support of this trillion dollar tax hike plan. He failed. Now more than ever, Congressional Republicans are united behind the belief that tax increases should be "off the table" in addressing Washington's over-spending problem.
The conservative movement has taken tax hikes off the table. Today, 25 conservative organizations sent a letter to House Speaker Boehner and Senate Republican Leader McConnell urging them to keep tax hikes off the table. The Coburn trillion dollar tax hike is far outside the mainstream of the conservative movement, as well as where Congressional Republicans are.
Most (fully 57%) of the $1 trillion in Coburn tax hikes are in five areas: mortgage interest ($187 billion), health insurance ($200 billion), chained CPI ($60 billion), foreign earned income exclusion ($71 billion), and the transit/parking benefit ($52 billion). This goes to show that it's not easy to raise taxes without hitting close to home. As we have pointed out, "tax expenditures" mostly go to everyday things like owning a home, having health insurance, and saving for retirement. The fact that 57% of the Coburn tax hikes are in this area is not surprising, but the report does bury this fact behind a veritable army of Lilliputian tax hikes which don't add up to much.
The best part of the tax plan? The "tax me more" fund. ATR has long called for a "tax me more" checkoff for limousine liberals who complain that their taxes aren't high enough. Rather than hiking taxes on everyone, these rich liberals should be able to pay more voluntarily to assuage their left-wing guilt. The Coburn plan does have this, providing a silver lining to an otherwise cloudy forecast for taxpayers.