The McCain Record: Taxes

Toward a unified field theory of McCainsian fiscal policy.

Sen. John McCain

Throughout his quarter-century in Congress, John McCain has consistently upheld one bedrock fiscal principle: He opposes tax increases. He opposed them in the years prior to 1998, when his voting record in the House and Senate was pretty consistently conservative. He opposed them as he drifted leftward between 1998 and 2006. And he’s opposed them since 2006, as he has drifted back to the right. “I’ve never voted for a tax increase in 24 years,” he told columnist Robert Novak early last year. “Never, ever, not under any president including President Reagan, and I will never vote for a tax increase, nor support a tax increase.” In 1993, McCain went so far as to seek (unsuccessfully) a change in Senate rules that would have required a 60-vote majority to raise taxes. Read his lips. No new taxes.

Breaking that promise cost President George H.W. Bush the 1992 election. In McCain’s case, though, nobody takes the promise seriously enough to care that he’s already broken it. McCain voted for a $1.10 per-pack tax on cigarettes in 1998. That measure failed, but in 1983 McCain voted to raise Social Security taxes as part of a reform package that was enacted into law. The payroll tax hike was necessary to maintain Social Security’s solvency, but that didn’t keep it from being denounced by the Heritage Foundation, bastion of the same sort of red-meat conservatives who constitute the base of today’s Republican Party. As recently as July 27 of this year, George Stephanopoulos asked McCain on ABC News’ This Week whether he might consider a new payroll tax increase. In response, McCain said, “I don’t want tax increases,” but “There’s nothing that’s off the table.”

All right, then. McCain has never voted for an income-tax increase, defined as an increase in rates. (You can also raise income taxes by eliminating loopholes, as McCain has supported  in the past.) Read his lips. No new tax brackets above the current 35 percent maximum. That’s the rock upon which McCain’s fiscal principles stand. McCain’s campaign tax plan calls for an extension of the Bush tax cuts to block “the Democrats’ crippling plans” to raise the top rate in 2011 to 39.6 percent. But McCain himself was happy to live with a top rate of 39.6 percent back in 2001. That was the status quo under President Clinton, and when President Bush’s first tax bill phased in a top-rate reduction to 35 percent, McCain voted no. McCain also voted noin 2003 when President Bush proposed accelerating the earlier tax cut. McCain was one of only two Republicans to oppose the first Bush tax cut and one of only three to oppose the second. But, technically, voting against a tax cut isn’t the same as voting in favor of a tax increase. In 2006, when it came time to vote on whether to extend the Bush tax cuts McCain had previously opposed, a “nay” vote now constituted a tax increase. Consequently, McCain voted in favor. Explaining his apparent flip-flop on NBC News’ Meet the Press, McCain said, “The economy had adjusted, the tax cuts were there, and if it would have been—and that’s the way it was designed. It would’ve been tantamount to a tax increase.” (Emphasis added.)

No one bought it, of course, because it was too plainly apparent by 2006 that if McCain continued to oppose Bush’s 2001 tax cuts he wouldn’t have a prayer of winning the Republican nomination in 2008. “Out of favor with the Republican base,” observed the rabidly anti-tax Americans for Tax Reform, “McCain has slowly tried to reinvent himself as a taxpayer friendly Senator.” The similarly rabid Club for Growth pronounced, “John McCain is no supply-sider.” This year, McCain has tried to recast his earlier opposition to Bush’s rate cuts as a vote in favor of budgetary prudence. In a January appearance on Meet the Press, McCain said, “[T]he reason—major reason why I was opposed to it was because there was no spending cuts.  I was proud to be part—a foot soldier in the Reagan revolution. And we had tax cuts, but we had spending cuts that went right along with it.”

There are three problems with this statement.

1) It’s absurd to cite Ronald Reagan as a model of budgetary prudence. Under Reagan, the budget deficit ballooned from $74 billion to $155 billion, setting at one point a still-unbeaten record of 6 percent of gross domestic product. “Reagan proved that deficits don’t matter,” Dick Cheney famously confided to then-Treasury Secretary Paul O’Neill, a proposition subsequently defended by Irwin M. Stelzer in the Weekly Standard. Cheney and Stelzer were wrong on the economics but right in summarizing the central message of Reagan’s domestic policy. Indeed, nine years ago, inspired by Americans for Tax Reform President Grover Norquist’s Reagan Legacy Project, I proposed that the budget deficit be renamed “the Reagan.” I still think it’s a good idea.

2) If McCain is such a deficit hawk, why does he refuse for all time to raise income-tax rates?

3) Look at McCain’s Senate floor statement from the 2001 tax vote. It included not one word about the need to keep spending in check. Why should it have? As Jonathan Chait has noted in the New Republic, during that brief historical moment the budget deficit was in surplus. What McCain actually said was, “I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle-class Americans who most need tax relief.” Six years later, the Club for Growth still couldn’t forgive McCain for having “aligned himself with the likes of Ted Kennedy in his rhetorical attacks in 2001 and 2003.”

If I had to guess, I’d say that McCain drifted leftward on taxes partly to impress the media, which by the mid-1990s were paying him ever-more attention; partly to piss off George W. Bush, for whom, during the 2000 primaries, McCain had a palpable dislike; and partly out of conviction. He drifted back rightward because, as noted before, he had to get right with the Republican Party mainstream.

But no one should underestimate the role played by sheer irrationality. Take another look at that 2001 floor statement. In it, McCain pointed out something that’s seldom remembered. Three days before McCain cast his famous vote against Bush’s tax cut (on final passage), he voted for it (on Senate passage). Why the change? It seems that McCain had wanted to cut the top rate one point, from 39.6 percent to 38.6 percent. When the Senate voted that down, Sen. Charles Grassley, who then chaired the finance committee, offered as a compromise to set the top rate at 36 percent. That version cleared the Senate with McCain’s support. When the bill came back from House-Senate conference, however, the top rate had been knocked back down to 35 percent. Based on that one-point difference, McCain declared war on his president and his party. Similarly, although McCain campaigned in 2000 in favor of restricting the estate tax to the very wealthiest families rather than eliminating it—a position he still holds, though after 2005 he stopped filibustering against outright elimination—in July 2000 he voted to phase it out entirely. In this instance, he doesn’t appear to have made any floor statement or put out any press release. Did he just get out of bed on the wrong side?