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Tax Politics Turns Upside Down

A Rip Van Winkle character who went to sleep three years ago and just woke up in late 2012 might hear the things Republicans have been saying about taxes recently and think the world has turned upside down.

Republicans blasting Democrats for being in the pocket of Wall Street because they want to lower the corporate tax rate? Republicans proposing to raise revenue by eliminating tax preferences for individuals and businesses?

These types of things did not happen before, but such stances have become part of the scene in Washington, as Republicans try to shrug off stereotypes that have weighed on their party and incorporate some previously neglected conservative impulses.

At the same time, Democrats also have changed their tune a bit, perhaps in response to the shift in GOP positions. Not long ago, Democrats may have bemoaned all the attention paid to spending cuts when more than $1 trillion was lost through the tax code every year through various tax breaks. These days, Democrats are more likely to downplay the revenue-raising potential of closing tax “loopholes,” as they try to raise tax rates instead and protect such popular programs as the deduction for home mortgage interest payments.

Changing rhetoric does not necessarily translate into shifts in policy, however, and both parties have basic political reasons to stake out their current positions in the tax debate. But there is also reason to think that some of the shifts in focus won’t go away.

For example, Rep. Scott Rigell, R-Va., bristles at the suggestion that his support for higher taxes makes him a “centrist.” Raising revenue while cutting spending “is the fiscally conservative position,” he said Wednesday.

Many Republicans have made similar arguments since the elections, saying it is consistent with their principles to scale down government programs, even if those programs are tax breaks and it means more revenue for the government.

The problem for Republicans is that President Barack Obama is insisting on raising revenue through rate increases before any broad tax overhaul is explored next year.

The challenge for Democrats is that if they get their way initially, they may need to then consider changes to tax breaks that they like.

In reality, neither party has a one-size-fits-all approach to taxes. Many Republicans still oppose raising taxes by any means, while many Democrats are eager for a tax overhaul.

The fraught politics of tax policy is what makes it hard to enact any major changes to the tax code.

“It takes an irresistible force to get tax reform to move and that force has to be a grand deal that brings down or deficit and debt,” Senate Majority Whip Richard J. Durbin, D-Ill., said this year. “We’re too politically divided. Unless we’re drawn to this grand bargain, it’s very difficult.”

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