Already a Bloomberg.com user?
Sign in with the same account.
For 25 years, Grover Norquist, president of the advocacy group Americans for Tax Reform and one of the most influential conservatives in Washington, has offered a simple warning to any politician who dared to flirt with the idea of raising taxes: “Don’t.” Those who sign his “Taxpayer Protection Pledge”—including 234 of 240 GOP members in the House, 40 of 47 Republican senators, and most Republican Presidential candidates—vow to “oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses” and to fight the elimination of any tax deduction unless it is matched by an equivalent tax cut.
Subtlety is not Norquist’s strong suit. In a 2003 interview with NPR, he likened the justification for the estate tax to “the morality of the Holocaust.” He magnifies his influence by hosting other conservative activists at weekly Wednesday breakfasts in Washington and spreading antitax gospel through frequent television appearances. Over the years, Republicans have been reluctant to cross him for fear of being vilified. “If Grover says to the Tea Party, ‘This guy is a bad guy,’ that’s it,” says Bruce Bartlett, a former adviser in the Reagan White House and Treasury Dept. official in the George H.W. Bush Administration.
Things are no longer so simple for Washington’s self-appointed fiscal enforcer. Republicans appear to have kept taxes off the table in any likely short-term deal to lift the debt ceiling. But once they turn to hammering out a genuine long-term solution, lawmakers are expected to consider both spending cuts and tax increases. That means many Republicans who signed Norquist’s pledge could wind up breaking it by voting for a significant debt compromise down the road. Norquist’s no-tax orthodoxy may finally have met its match in the nation’s financial mess. This has left him in an uncomfortable spot—and in danger of seeing his influence slip. “I think Grover may be a step behind where this debate is going and where it frankly needs to go,” says Tony Fratto, a partner at Hamilton Place Strategies and a former Bush White House spokesman.
It turns out that much like the tax code he abhors, Norquist’s pledge contains a loophole that could allow Republicans, and the antitax crusader himself, a way to back at least limited revenue increases. Some higher taxes, he now says, are O.K. after all. “Temporary tax cuts, put in temporarily, understood by opponents and proponents to be temporary … allowing that to lapse doesn’t matter; it is not a tax increase,” he says. As a result, if Republican lawmakers allow President Barack Obama’s payroll tax cut to expire at the end of the year, that won’t violate the pledge—even though Americans would pay an additional 2 percent of their earnings up to $106,800.
Not all temporary tax cuts meet this definition, though. Allowing the Bush tax cuts, dating from 2001 and 2003, to expire would be an impermissible tax hike because “that was always meant by its proponents to be as permanent as you could make it,” he says. “It doesn’t pass the laugh test not to see them as permanent.”
How did the iron-fisted arbiter of Washington’s tax debate end up twisted around the meaning of the word “temporary”? The trouble started when Norquist told the Washington Post on July 19 that allowing the Bush tax cuts to expire in 2012, which could boost government revenue by $3.9 trillion over 10 years, would not count as a tax increase. “Not continuing a tax cut is not technically a tax increase,” he told the paper’s editorial board.
That seemed like exactly the opposite of what he had been saying for years. Norquist says he misspoke in the Post interview. “Somewhere in there, I said the opposite of what I meant.”
Democrats pounced: Senator Charles Schumer (D-N.Y.) welcomed what he called a “coded message” that freed Republicans to embrace taxes as part of a debt deal. Prominent Republicans, including House Speaker John Boehner, publicly contradicted Norquist, saying the Bush tax cuts were still off-limits.
Norquist tried to clarify his position in a New York Times op-ed piece. He explained how allowing the top marginal tax rate to return to 39.6 percent from its current 36 percent could be kosher. “If there were no vote in Congress and taxes rose automatically, then no politicians would have voted for higher taxes and no elected official would have broken his or her pledge,” he wrote.
In contrast to the simplicity of Norquist’s pledge, his more recent parsing of what is and isn’t a tax hike has caused confusion among Republicans. He insists GOP leaders understand there’s been no softening in his antitax fervor.
There are hints the power of the pledge may be waning. In November, after Norquist condemned Republicans on the President’s debt commission for recommending higher tax revenues, one of them, former Senator Alan Simpson, growled: “Grover Norquist will be irrelevant in a year.” During ultimately unsuccessful negotiations with the White House over a deficit reduction “grand bargain,” Boehner, a pledge signer, offered a package that would have raised $800 billion in revenue over 10 years through economic growth and loophole closing. At least three Republican senators—also pledge signers—backed a separate plan that would have raised nearly $1 trillion. And one GOP Presidential candidate, Jon Huntsman Jr., has flat-out refused to sign Norquist’s pledge.
A sample of what may lie ahead came in mid-June when Norquist found himself in a war with Senator Tom Coburn (R-Okla.), one of Capitol Hill’s leading fiscal conservatives, over a proposal to kill $6 billion in subsidies for ethanol production. Many conservatives detest such provisions in the tax code, seeing them as disguised government spending that distorts free markets.
Norquist opposed killing the subsidy as a violation of Americans for Tax Reform’s pledge, and he said Coburn, a pledge signer, had “lied his way into office.” The Senate ultimately eliminated the ethanol subsidies after Norquist said senators could vote to do so if they supported a compensating tax cut. “One of the reasons why Coburn has been pushing this ethanol issue is precisely to break the ice and show, ‘We can go against Grover if we play our cards right,’” says Bartlett. “One of these days, Grover is going to lose. It’s just a matter of time.”
The bottom line: Norquist’s future influence will be tested as Republicans choose between reneging on their no-tax pledge or risking a U.S. debt default.