Sen. Hatch: Temporary Extension Of Bush Tax Cuts Is Actually A Tax Increase

November 09, 2010 10:47 am ET — Matt Finkelstein

Sen. Orrin Hatch

In the wake of the midterm elections, several Republican leaders have rejected the idea of reaching a compromise on the Bush tax cuts in the "lame duck" session of Congress. President Obama is reportedly open to a deal that would include permanent tax cuts for the middle class and a temporary extension of tax cuts for the wealthiest Americans. However, top Republicans say they are adamantly opposed to "decoupling" the tax rates in such a way.

Yesterday, Sen. Orrin Hatch (R-UT) offered an especially creative reason for opposing the potential compromise. According to Hatch, who suggested that he could support a temporary extension of all the tax cuts through the next election, making the middle class tax cuts permanent while only temporarily extending tax cuts for the nation's top earners would actually amount to a tax increase

Sen. Orrin Hatch (R., Utah), who is widely expected to become the top Republican on the tax-writing Senate Finance Committee next year, said that while he would prefer to renew all the lower tax rates permanently, he would consider a shorter-term extension.

"A reasonable path forward should be on the table," Hatch said. "It would garner support from Democrats and Republicans alike. That path forward is an extension of all the tax relief well past the next election." [...] 

Hatch rejected another compromise idea that has been floated of extending the lower tax rates for so-called middle class Americans permanently, while only temporarily continuing the discounted rates for wealthier Americans.

"That's a tax increase plain and simple that would be used to fund more Washington spending and would discourage private sector job growth," he said.

Just so we're clear, here is Hatch's argument:

(1)  Temporary extension of tax cuts for the rich + temporary extension of tax cuts for the middle class = possibly acceptable outcome.

(2)  Temporary extension of tax cuts for the rich + permanent extension of tax cuts for the middle class = "a tax increase plain and simple."

Hatch couldn't pass eighth grade math with that kind of deductive reasoning, but it's easy to see why Republicans will do mental gymnastics to make sure the tax cuts aren't separated. Tax cuts for the wealthy are expensive, inefficient, and unpopular. Once the economy rebounds further, it will be nearly impossible to justify upper-income tax cuts on their merits. So Republicans are holding middle class tax relief hostage to protect the richest two percent.

Still, President Obama seems intent on trying to reach a compromise. With negotiating partners like this, though, it's understandable why many people believe he's wasting his time.

Update: Adam Serwer explained yesterday why Republicans have no incentive to compromise: "Republicans win if the Bush tax cuts get made permanent, and they win if the tax cuts expire. If its the former, Republicans get their preferred policy option. If it's the latter, they get to accuse Obama of raising taxes."