Mattie Duppler

Congressman Lummis Supports $2 Trillion Tax Increase


Posted by Ryan Ellis, Mattie Duppler on Thursday, March 29th, 2012, 12:18 PM PERMALINK


 

On Wednesday night, Congressman Cynthia Lummis voted for a budget which calls for nearly $2 trillion in tax increases and contains phony and fraudulent spending cuts.  As one of only 38 Congressmen in the 435-member U.S. House of Representatives to do so, Congressman Lummis should answer to her constituents as to why she supports this budget.

The vote rejecting this budget was 382-38, one of the lowest support levels for a budget on record.

The budget in question was offered by Congressman Jim Cooper (D-Tenn.) and Steve LaTourette (R-Ohio).  It seeks to mirror the recommendations of President Obama’s Debt Commission, often known as “Simpson-Bowles” for the co-chairs of that commission appointed by President Obama.

The budget has the following elements:

$2 trillion in Higher Taxes:

--The budget calls for raising income taxes by sharply curtailing income tax deductions and credits.  It would greatly limit such common, everyday tax breaks as the mortgage interest deduction, charitable deduction, and tax-free health insurance from work.  The budget seeks to raise $1.2 trillion over the next decade from these tax hikes, even after a reduction in tax rates

--In addition, the budget calls for tax brackets and other tax provisions which increase with inflation to grow at a slower rate.  This is a tax increase on every American who pays taxes.  This would raise taxes by $89 billion over the next decade

--The budget also calls for more income to be subject to Social Security payroll taxes.  More and more wages and self-employment income would have to pay taxes into the now-bankrupt Social Security system.  Roughly speaking, the amount of wages and self-employment income subject to the 12.4% Social Security tax would grow from about $100,000 today to about $150,000 under this budget.  This is estimated to raise taxes by $77 billion over ten years

--The tax increase budget also calls for workers to have to pay taxes on employer-provided health insurance.  If the value of this tax benefit grows at more than about 6% a year (and it’s been growing faster than that for decades), workers will have to start paying taxes on the insurance they receive at work.  It’s unknown how much this will raise taxes

--Finally, the budget claims savings from lower interest payments on the national debt.  $205 billion is due to tax hikes in the budget, so these savings should be linked to the tax hikes

*All together, the budget voted on last night was a ten-year tax hike of nearly $2 trillion*

In addition to the $2 trillion in tax hikes in this budget, it is also filled with fraudulent “spending cut” gimmicks:

--The LaTourette-Cooper budget double counts spending cuts that have already happened. $500 billion of their supposed savings comes from the cuts already set in law by the August 2011 debt limit deal.

--The budget dishonestly claims to net $650 billion in cuts from new discretionary caps. However, the plan does not include the $424 billion in supplemental war spending the authors also call for in their budget.

--Taken together, the budget plan includes almost $1 trillion in phony spending cuts. This fraudulent accounting means the purported savings from discretionary spending cuts amounts to only $200 billion.  Even giving the authors credit for all the claimed mandatory spending cuts, their fake discretionary cuts means the bill – at best – offers one dollar in spending cuts for every one dollar in tax hikes.

Why did Congressman Lummis vote for a budget that raises taxes by $2 trillion and contains phony and fraudulent spending cuts?

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Cooper-LaTourette Budget Resolution Raises Taxes by Nearly $2 Trillion


Posted by Ryan Ellis, Mattie Duppler on Wednesday, March 28th, 2012, 3:04 PM PERMALINK


Congressman Steve LaTourette (R-Ohio) and Jim Cooper (D-Tenn.) have introduced a budget resolution based off the Simpson-Bowles tax hike debt commission.  Their budget resolution targets $4 trillion in reductions to the deficit through a combination of massive tax increases and modest spending cuts.  Under reasonable accounting metrics, nearly 40% of this amount comes from tax increases, not spending cuts.  Targeting deficits is the wrong metric--it's spending which should be the target, since tax hikers like Simpson-Bowles, President Obama, and this budget's authors can easily cut the deficit by raising taxes on American families and employers.

The budget claims new spending cuts that are already a part of current law. The plan ignores the cuts put in place by the August debt deal and claims them as savings.

By their own numbers, this budget raises taxes by $1.2 trillion.  They do this by calling for a net income tax hike disguised as tax reform.  In exchange for sharply curtailing income tax deductions and credits, their budget calls for the top tax rate to be lowered to between 23 and 29 percent.  While this may sound like tax reform, it isn't.  Even after this is accomplished, federal tax coffers are still swollen by at least an additional $1.2 trillion over the decade relative to a current policy baseline.  This is a net tax hike disguised as fundamental tax reform, which is supposed to be a revenue-neutral exercise in cleaning up the tax code.

There are hundreds of billions in hidden tax hikes the authors don't admit to.  The actual level of net tax increase is probably closer to $2 trillion.  That's because there are several tax increases that their budget doesn't count in the $1.2 trillion figure.  These include:

  • Chained CPI.  While this reduces government spending on programs like Social Security, it also slows down the rate at which tax brackets and other tax provisions grow with inflation.  Estimated additional tax increase: $89 billion over ten years
     
  • Social Security tax increase.  The budget calls for an expansion in the Social Security taxable wage base, subjecting more small business profits and wages to Social Security taxes.  Estimated additional tax increase: $77 billion over ten years
     
  • Tax increases on employers who provide health insurance to their employees.  Page 70 of the Simpson-Bowles-Cooper-LaTourette budget calls for a trigger to be pulled if the growth of the tax benefit for workplace health insurance plans grows by more than GDP-plus-1 percent.  Estimated additional tax increase: unknown
     
  • Interest savings due to tax increases.  It's not fair to call savings on interest on the national debt "spending cuts" if they occur because of a net tax increase.  Thus, some of the interest savings must be allocated to the tax hike side of the ledger to get a proper ratio.  Interest savings derived from net tax hikes: $205 billion

 

Added together, the tax hike component of this budget is not $1.2 trillion, as the authors claim.  It's actually much closer to $1.6 trillion.  Tax increases represent about 37% of the balance of this budget resolution, for a ratio of 1.6 to 1 (spending cuts to tax hikes).

The only way to achieve these tax increases is to raise taxes on the middle class.  Most of the tax benefits the authors want to target are basic, middle class tax provisions: the mortgage interest deduction, charitable contributions, employer-provided health insurance, 401(k) and other pension plans, etc.  There is not some "magic grab bag" of tax deductions on "someone else" that can be used for this tax hike.  Every middle class American would feel the squeeze.  Just like President Obama, this budget calls for a middle class tax hike without having the guts to admit it.

The goal of this budget is to raise the long-run, durable tax revenue target to record levels.  The Simpson-Bowles plan called for a federal tax revenue target of 21 percent of GDP.  This would be a record, and unprecedented in American history.  The Ryan budget, by contrast, calls for a long-run tax revenue target of 18-19 percent of GDP--right in line with the historical average.  Congressmen committed to controlling the growth of federal spending and debt (which is fueled by ever-higher taxes) should oppose this budget.

The tax hike may be even bigger than $2 trillion.  Back when the Simpson-Bowles report came out, Congressman Ryan said the actual tax increase was not $1 trillion, as the report claimed, but over $2 trillion.  The Heritage Foundation said that the tax hike was closer to $3.3 trillion.  Since this budget is based off of Simpson-Bowles, it's fair to question whether the authors have been honest with Members about the size of their net tax increase.

ATR supports fundamental tax reform, but this budget isn't that.  Fundamental tax reform means "lower the rates, broaden the base."  Any base broadening must be plowed into lower rates.  To only partially lower rates means that the measure is no longer tax reform--it's a tax increase trying to trick people into thinking it's tax reform.

A vote for the Simpson-Bowles budget is a vote against taxpayers.  238 Members of the House have signed the Taxpayer Protection Pledge.  They have promised to do the opposite of what this budget calls for.  This budget calls for a net tax increase on middle class families and small businesses.  Voting for this tax hike budget would be breaking faith with the constituents who voted for Members after they assured them that tax hikes would be off the table.  This budget will fail, and it deserves to fail.

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