ATR Opposes Virginia Governor McDonnell's Current Transportation Plan
As the bill stands now, Governor Bob McDonnell’s proposed 2013 “Road to the Future” transportation plan is a massive $1.22 billion tax increase that should be defeated by the General Assembly. For legislators who have signed the Taxpayer Protection Pledge, supporting all of the measures advocated in this plan would be a clear violation of the promise made to Virginia taxpayers to oppose any and all efforts to increase taxes unless it is significantly improved.
The governor’s prior attempts to prioritize funding for transportation without raising taxes were defeated by Democrats and a select group of Republican state senators whose last concern is the transportation crisis.
In the past, this wing has required that in exchange for prioritizing transportation as budget expenditure, taxes had to go up. Legislators who demand that more of Virginia’s current revenue be directed to transportation in exchange for higher taxes demonstrate that their lowest budget priority is transportation.
When members of the General Assembly say they are unable to prioritize state spending for transportation, they are referencing opposition from both Democrats and Republicans like Senators Frank Wagner, John Watkins, and Tommy Norment. These are the culprits that have put Virginia in the transportation crisis it is currently enduring.
The Governor’s current plan is designed to win over this wing of the General Assembly. According to the Governor’s own numbers, replacing the gas tax with a 16% higher sales and use tax is a $607 million tax increase. Increasing vehicle registration and alternative vehicle fees is a $614 million tax increase.
Even worse, if the Governor successfully lobbies Congress to implement a national internet tax by passing the Market Place Equity Act, taxes rise by $1.2 billion over 5 years.
This year, as states like Louisiana and North Carolina move in the direction of pro-growth tax reform that lessens the burden of government on taxpayers, Virginia should not take the lead on an alternative course by pursuing massive tax hikes.
Supporters of the governor’s original goals – to prioritize transportation funding as part of currently collected and new growth revenue – should reject the tax hikes in the proposed plan.
Supporting the Governor’s proposed plan otherwise is a massive tax increase that Virginia taxpayers cannot afford.
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Governor Bob McDonnell's Transportation Plan
Governor Bob McDonnell (R-VA) has taken a bold step in working to fund Virginia’s transportation crisis. It is clear that he has an interest in leaving a lasting legacy as a governor who prioritized transportation. Unfortunately, his “Road to the Future” is paved with a number of flawed solutions.
First, the good. The plan, which can be seen here, gets one thing right. It begins to prioritize transportation as a core state expenditure. By changing the share of revenue collected from the sales and use tax that is designated to maintenance costs and the Transportation Trust Fund, McDonnell makes clear that transportation deserves a bigger piece of the budget pie.
“Transportation currently receives 0.5 cent of the SUT, and the governor proposes to phase in this share to 0.75 cent over five years.”
According to McDonnell’s own analysis, this will result in more than $811 million over the next 5 years for transportation out of currently collected revenue.
|Increase Existing SUT commitment from .05% to .75% over 5 years||$49.0||$101.7||$158.4||$219.2||$283.2||$811.5|
Next, the tax cut. The Governor proposes eliminating the state 17.5 cents/gallon tax on gasoline. This is a tax cut of about $3.5 billion tax cut over 5 years.
|Eliminate 17.5 cents/gallon tax on gas||($684.1)||($694)||($703.7)||($708.8)||($713.8)||($3,504.4)|
Now, the bad. Unfortunately, this tax cut is replaced by a 16% increase in the state sales and use tax. The Governor’s plan replaces the current gas tax with a .8 cent increase in the sales and use tax. The net tax increase is outlined in the Governor’s own projections:
|Replace 17.5 /gallon tax on gas with .8% NGF SUT increase||$24.6||$109.3||$131.8||$158.4||$182.9||$607.0|
The higher sales and use tax increase is projected to bring in $4.1 billion in additional revenue over 5 years. Subtract current gas tax revenue projections from the increase in projected SUT revenue and you get a $607 million net tax hike.
Now, more bad. The “Road to the Future” includes a $15 increase in vehicle registration fees. This is a 5-year car tax increase of $547 million.
|$15 Increase in Registration Fees||$109.4||$109.4||$109.4||$109.4||$109.4||$547.0|
Did you recently purchase an alternative fuel vehicle in Virginia? Sorry, says McDonnell. $66.6 million in higher taxes for you.
|$100 Alternative Fuel Vehicle Fee||$10.2||$11.4||$13.0||$15.0||$17.0||$66.6|
Next, the horrible. Republican Governor Bob McDonnell is lobbying the 113th Congress to pass the Market Place Equity Act, the internet sales tax.
Creating competition among states for higher taxes and placing greater burdens on businesses to comply with thousands of new regulations is a huge step in the wrong direction. Passage of this federal legislation would result in over $1.1 billion in higher taxes on Virginia consumers.
|Market Place Equity - Transportation||$175.7||$199.1||$207.0||$214.8||$222.2||$1,018.8|
|Market Place Equity - Local Trans||$23.7||$26.9||$28.0||$29.1||$30.1||$137.8|
In conclusion, the proposed plan is a massive $1.22 billion tax increase. With the inclusion of the federal Market Place Equity Act, Virginia taxes will rise by $2.38 billion over 5 years.
ATR is encouraging legislators to amend the “Road to the Future” so that it is not a net tax increase and pass a plan that shifts a greater share of sales and use tax revenue to transportation costs and projects. If transportation is a priority, it's time to allocate current funds in a way that reflects that.
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Norquist: Fight Against President Obama's Overspending Is Winnable
With the passage of a bill to avert tax increases for nearly all American taxpayers, nearly every “Bush tax cut” was made permanent. Why weren’t they all extended? Grover explains:
The 2001 and 2003 “Bush tax cuts” were enacted with an expiration date because 60 votes are required in the Senate to make a tax cut permanent. Other tax cuts such as the “patch” limiting the Alternative Minimum Tax and the Research and Development Tax Credit would lapse every two years giving politicians an opportunity to “sell the same horse” again and again to voters and campaign contributors.
Hence the “fiscal cliff” of an automatic tax increase scheduled for Jan. 1, 2013 that would result in taxes increasing $500 billion in that one year alone as all these “temporary” tax cuts lapsed together. Only legislation passed by the Democratic-controlled Senate, the Republican House, and signed by President Barack Obama would stop the tax increases.
The world was upside down. Normally it takes the House, Senate and president acting together to raise taxes. Now it would take all three to stop any or all of the tax cuts from lapsing—and from taxes increasing on all Americans.
This Alice in Wonderland situation flowed from the modern Democratic Party’s hostility to tax reduction. Back in 1981 the Reagan tax cuts were made permanent. The Tax Reform Act of 1986 reduced the top rate from 50 percent to 28 percent—permanently.
The legislation passed by the House, Senate and now signed by the president that makes 85 percent of the Bush tax cuts permanent is a bittersweet victory or defeat. Income tax rates fall for 99 percent of Americans. Those reductions are now permanent. And yet Americans rightly worry about Obama’s ability to force the top rate to automatically jump back to Clinton’s 39.6 percent from Bush’s 35 percent. Obama won his class warfare pound of flesh.
One hundred and fifty seven House Republicans voted “no” on the legislation to make most of the Bush tax cuts permanent out of understandable frustration that there was no vote or action they could have taken to restore the full Bush tax cut.
Now that we have settled the debate on the fiscal cliff and impending tax hikes, Congress is in a position to reverse course on the overspending binge that the President has embarked upon for four years.
Now the tables have turned. The income tax rates and important credits and deductions are now permanent. It takes an affirmative vote by the House and Senate to increase taxes ever again. (Good luck with that, Mr. President.)
And what about spending? Were we not promised jillions of dollars in spending reduction in return for tax increases? Was that not the mantra of the Washington Establishment, the promise of the 2010 bipartisan panel that came to be known as the Simpson-Bowles commission? That was always a fool’s errand, the Lucy-and-the-football ploy that defeated and humiliated Republicans in 1982 and 1990.
We now leave a battlefield where the proponents of bigger government had the upper hand—the default position was a $500 billion a year tax hike—to one where the default position is cut spending.
He goes on to explain the three upcoming virtuous “fiscal cliffs”:
First, the sequester. If Congress does nothing, unless the House, Senate, and President Obama agree on an alternative, there is an automatic sequester of $1.2 trillion over the next 10 years. One hundred billion dollars in spending cuts a year—automatically. House Republicans have already offered an alternative savings package of the same amount that shifts the cuts from defense to other areas.
The second virtuous cliff is the debt ceiling Obama is spending—again—at a rate that runs up more than $1 trillion in deficits each year. He must come back hat in hand to ask for a debt ceiling increase. The “Boehner rule” first applied with great effect in 2011 requires a dollar-for-dollar savings to “pay” for any debt ceiling hike. Obama wants/needs $1 trillion dollars in debt ceiling—so, he needs to come up with $1 trillion in reduced spending. Or not increase in the debt.
In 2011, conservatives won a $2.5 trillion spending cut in return for the higher debt ceiling.
The third lever for conservatives in the fight to limit federal spending is the fact that the Democrats in the Senate no longer do budgets. It is too embarrassing to write and vote on budgets that clearly run up trillions in debt. So our federal government operates on a series of “continuing resolutions” that allow money to be spent for a month or six months or a year.
Now Republicans in the House can offer Obama another month of “allowance” in return for actual cuts in spending. This worked in early 2011 and was abandoned as a strategy only because the slow pace of progress frustrated them. Now Republicans understand that slow progress is the only road to limiting the damage Obama’s spending is doing. There is no partner available for a grand bargain. Obama does not wish to reform entitlements or end his Chicago style “pay to play,” “pork for the boys” tax and spend policies.
Three levers to control spending. This time they are in our hands.
There is great anger that Obama could force higher tax rates on small businesses simply by saying no. Now is the time to channel that anger and energy into the very winnable fight against Obama overspending.
What do you think? Which “fiscal cliff” should Congress use to force the President’s hand to cut spending?
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Left Leaning Jim Cramer Finally Comes Around on Taxes
In an interview with Joe Kernen on CNBC’s “Squawk Box,” Jim Cramer said he’s finally content with tax rates. He was asked specifically about two options Congress pretends to weigh at every “cliff”: the need to get entitlements under control versus the ease of raising taxes.
Here’s the back and forth:
Joe Kernan: “Do you think we need to get a handle on entitlements immediately? Should that be what we do with the debt ceiling? Or is it important to -- to raise another $600 billion in tax revenue immediately?”
Jim Cramer: no more tax revenue. NONE!
Joe Kernan interrupted to point out that Obama’s former chief economic advisor says the President is “going to insist on that.”
Cramer went on to say, “There should be no more tax increases. We should be coming up with a new way to be able to, be creative ways to keep costs down on Medicare. Maybe make part B more expensive for people, but no, no Joe, no more taxes.”
Cramer continued, “I mean ‘read my lips’ no more taxes and don’t go back on it because everyone’s going to get them and everyone who’s sat down with their accountant in the last 48 hours in dazzled. Dazzled about what’s gonna happen. And I’m not just talking about the wealthy people because we’re starting to talk about healthcare, small businesses what they’re thinking about at the end of 2013. So no, it’s Medicare, Medicare and then Medicare and it’s all that matters.”
It appears as if 2012 wasn’t the only year for political “evolutions.” From Democrats evolving on middle class tax cuts to Mad Money Cramer finally coming around on the tax debate, it seems that at least a few have given it a rest on the calls for higher taxes. From the guy who predicted Obama would win 440 electoral votes, yes as in 108 more than he did win by, perhaps limited government advocates can count this as a small victory.
[Video credit to MRC and Newsbusters]
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The Democrat Evolution on Middle Class Tax Rates
On May 26, 2001, Democrats had the opportunity to demonstrate that they supported across the board tax cuts that significantly reduced the tax burden for groups they claim to care about: the middle and lower classes. At 10:11AM that day, however, 154 Democrats voted No on the Economic Growth and Tax Relief Reconciliation Act (EGTRRA).
This bill had the following implications by 2006: reduction of individual income tax rates from 15, 28, 31, 36, and 39.6 percent to 10, 15, 25, 28, 33, and 35 percent.
28 Democrats that year were sensible enough to vote Yea.
Some balked at the suggestion that the Laffer curve could work under President Bush like it did under Presidents who cut taxes before him. Unsurprisingly though, receipts from individual income taxes did increased by 47% through 2007, when the mortgage crises began.
Some may point out that in 2001 Democrats had a legitimate alternative to the Republicans’ across the board tax relief legislation. This assertion is wrong.
Charlie Rangel offered an alternative bill that would have reduced the 15% tax bracket to 12% on the first $10,000 on a single flier’s return. It also gave everyone a $225 tax credit for joint filers and expanded the Earned Income Tax Credit.
Rangel’s alternative targeted low income earners and taxed most of their income at a higher rate than the Republican plan. What is clear is that Democrats did not have any intention of cutting taxes for middle class workers, let alone those making up to $250,000.
Tuesday’s fiscal cliff vote was significant for the Democrat party. 66 of the same Democrats who voted against EGTRRA in 2001 voted for Tuesday’s fiscal cliff bill. The same party that overwhelmingly opposed a reduction of taxes on middle income Americans in 2001 extended the rates Republicans brought to existence for those making under $400,000 in 2013.
Fast forward to May of 2003.
The Jobs and Growth Reconciliation Tax Act (JGTRRA) passed by a margin of 231 to 200. This legislation lowered the capital gains and dividends rate to 15% and provided a 50% bonus depreciation allowance. Bonus depreciation allows businesses to deduct business expenses like equipment from their taxes, which encourages investment.
In addition to an extension of the bonus depreciation allowance, the fiscal cliff deal preserves the 15% capital gains and investment rate for married couples making less than $450,000 and single people making less than $400,000.
In an ideal world where Democrats didn’t control Washington, these rates would have been extended for everyone. By permanently linking dividend and capital rates together, however, the Tuesday compromise was a partial permanent enshrinement of the 2003 tax cuts that Democrats opposed by a margin of 198-7 in 2001. 97 of those same Democrats who voted against JGTRRA in 2001 voted Yea on the fiscal cliff bill in 2013. Many would consider this an accomplishment.
What now? For years, Democrats have been campaigning on raising the top tax rates. Special thanks to Obamacare, successful business owners and individuals now pay more today than they did under Clinton. Mission accomplished for them. The debt still stands at $16.4 trillion and we’re set to hit the limit in less than 2 months.
As Politico points out, “Democrats readily acknowledge that they’ve exhausted their ability to raise taxes on the richest Americans by jacking up their rates… that politically speaking, there’s virtually no way to keep increasing marginal tax rates.” Taxpayers and small businesses sigh in relief.
The next two months will be strife with conflict as Democrats and Republicans try to figure out how to accomplish that which modern day Democrats have never been willing to do: cut spending.
What are your thoughts? Where should Congress start in the process of identifying cuts? (Obamacare costs at least $1.76 trillion for example…)
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Documenting the Great Migration of Fed Up Taxpayers
Taking to task the announcement that the IRS would no longer publish data on interstate taxpayer migration, Patrick Gleason noted that this would be a great disservice to everyone. Noting the importance of examining the effect of higher taxes and overregulation, this data allows us to understand some of the consequences of big state government regimes like California, Illinois, and Maryland.
From 1995 to 2010, California had a net loss of 1.7 million tax filers, who took with them $37.2 billion in income.
Over this same period almost a million people have left Illinois, a state that last year passed the largest tax increase in its history. These erstwhile Illinois citizens took $32 billion in income with them to friendlier tax climates. The state’s Democratic governor, Pat Quinn, had to grant special carve-outs from his massive 2011 tax hikes to some of the biggest corporations in the state, such as Sears Holding Corp. and the Chicago Mercantile Exchange, just to prevent them from leaving the state.
Then there is Maryland Governor Martin O’Malley, a 2016 presidential hopeful. He is such a huge proponent of Obama’s high-tax, high-spending agenda that he has already implemented many of the same policies in his state.
The results have been less than stellar. In O’Malley’s first term, more than 57,000 taxpayers fled Maryland, taking almost $3 billion in income with them.
Gleason goes on to explain that IRS data demonstrates that people fed up with these unfriendly states, unsurprisingly, move to states that have gone in the opposite direction of big government.
During the same 15-year period, from 1995 to 2010, Texas and Tennessee, states that do not tax wages and have relatively low per capita spending, have seen an influx of 345,000 and 989,000 people, respectively, bringing more than $30 billion in income with them to their new homes in the Lone Star and Volunteer states.
It’s not only having lower taxes that resulted in this great migration. Having energy resources and polices that fully utilize them in a business-friendly, low-tax environment are the main reason states like Texas have flourished. To the contrary, states like California have the resources but fail when it comes to utilizing them.
It is the third-largest oil-producing state – yet it is a fiscal basket case. It loses revenue and jobs by having policies that prevent the state from fully using its resources. There are 11 billion barrels of oil and 19 trillion cubic feet of natural gas now recoverable with current technology just waiting to be tapped in California.
At the end of the day, if you live in a state that might not necessarily have an overspending or taxing problem should you care? Absolutely.
Perhaps most disconcerting is that lawmakers in charge – including Brown, O’Malley and Quinn – appear to believe the federal government will continue to bail them out of their profligacy and irresponsibility.
Taxpayers from successful states should be wary of these failing states â€‘ including California, Illinois and Maryland â€‘ and the threat they pose to the fiscal health of the entire nation.
What do you think? Are you willing to bail out state governments like California or Illinois for ignoring simple economics?
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Scott Galupo Upset that Pledge Is Not End-All Protection Against Big Government
In recent columns for the American Conservative about the Taxpayer Protection Pledge, Scott Galupo has expressed discontent with the fact that over time, federal government spending has increased. I’m sure many taxpayers and most conservatives share his concerns.
Galupo misses the mark, whether it is on purpose or by mistake, for a number of reasons. First, the Pledge is one protection for taxpayers against an increased financial burden of a growing federal government. It is but one tool in the shed of protections against a government that demands you fork over more of your hard earned cash to pay for its overspending problem.
This problem, overspending, is what resulted in the tea party. What began as small, disorganized meetings grew into a national movement. It was all in response to the federal government’s solution to a down economy: spend, spend, spend.
The role that the Pledge has played is ensuring that those bad deeds do not go unpunished. As politicians who signed the Pledge to their constituents held the line on taxes, they ensured that the focal point of budget discussions was not how much we have to raise taxes to pay for Washington’s mistakes, but how much we needed to cut back on the overpromised overspending binge.
Additionally, the Taxpayer Protection Pledge has succeeded in giving taxpayers an easy metric to measure the promises that politicians make to them.
The federal Pledge reads as follows:
I, _____, pledge to the taxpayers of the ____district of the state of ______, and to the American people that I will:
ONE, oppose any and all efforts to increase the marginal income tax rate for individuals and business; and
TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.
The power of the pledge is that it allows a politician to credibly commit to his or her voters that he will not raise taxes. In the past, many politicians have made verbal promises that crumbled like pie crust.
But the Taxpayer Protection Pledge is public. In writing. Voters don't have to parse the phrasing or a speech. There are no weasel words in the Pledge. It says what it means and it means what it says. No tax increases. No excuses.
Galupo may have a problem with the fact that over time spending has grown and specifically was not cut during the Bush years. His anger, however, is misdirected. The Pledge is a tax-centric promise that politicians make simply so that a voter knows where they stand on that single important issue.
The biggest failure of Galupo’s critique of the Pledge is his attempt to make a connection between holding the line on taxes as an excuse for increasing spending. By no logic are they connected. Sure, during the Bush years Republicans ushered in significant tax reform (i.e. cuts) and yes, they did raise spending. Getting spending under control, however, was never a priority for the Bush administration. Despite positive tax reform, increasing spending will be a long-lasting stain on his legacy.
This "output" was not at all related to the Pledge, which commits a politician to nothing more than an opposition to higher taxes.
This is the value of the Pledge. Anybody can oppose taxes on the stump as an abstraction. It is now, when increasing taxes is touted as the only possible solution, that the Pledge proves its worth.
It reminds fiscally conservative voters why they supported the candidates they voted for. It reminds their representatives in Congress of the promise they made to not add to their constituents’ tax burden. And it provides a rare clear view of which politicians can be trusted to keep their word. America, despite the massive growth in the burdens imposed by government, remains that shining entrepreneurial society on the hill. We need no further stimulus, no creative accounting games.
At CEI, we recognize One need not teach the grass to grow, simply move the rocks off our [economic] lawn! The Pledge has made it harder to put move some of the tax rocks off the lawn. More rocks need to be moved, but it is an important step and Grover and ATR merit support, not condemnation, for that.
Washington’s problems are based in overregulation, over-taxation, and overspending. Neither Grover nor anyone at Americans for Tax Reform has ever claimed that the Pledge is the only protection against spending or remotely related to regulation (unless such regulation includes higher taxes). The role it does play is ensuring that taxes do not go up. The reason that is important is because when taxes tend to rise, so follows spending. Blue states like California and Illinois best exemplify this phenomenon.
We suggest Galupo stop searching for singular mechanism by which to prevent all that is “bad” in Washington. No such force exists. The Pledge is a simple promise with a simple goal: put the tax hike opposition plank in writing to constituents. Given that a Republican has not voted for a rate increase in more than 20 years, most people would consider the Pledge a success.
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Senator Pat Toomey: I Won't Violate Pledge to Pennsylvanians
In an interview this week with CNN's John Berman, Pennsylvania US Senator Pat Toomey demonstrated that he understands the right course of action for ongoing fiscal cliff negotiations.
The back and forth between Berman and Toomey was emblematic of many interviews of Pledge signers. It demonstrated that many in the media have never read the Taxpayer Protection Pledge and are working diligently to secure a headline about a certain Congressman willing to break their Pledge. Unfortunately for Berman and CNN, Toomey is a pro-growth conservative who intends on keeping his personal written commitment to Pennsylvania taxpayers.
Asked three separate times whether he would be willing to eliminate credits and deductions, raising taxes, Toomey explained that he would only do so if a comprehensive tax package also included rate reductions. He will not violate his Pledge to Pennsylvania voters.
Berman: You would favor raising revenue by closing loopholes and reducing reductions?
Toomey: If we were lowering marginal rates at the same time and if we were going to do something meaningful about the actual problem we have which is spending and the entitlement programs.
Berman: Would you be in favor of closing loopholes and reducing deductions without the corresponding rate cut?
Toomey: No. The revenue side isn’t where the problem lies in the first place. This is a side show to the real problem. The real problem that the President has refused to address: how we are going to put our entitlement programs on a sustainable path, how we are going to live within our means. If we're going to do something on the revenue side, by gosh sakes, let's at least not damage the economy any more than we have to and let's do it by lowering marginal rates.
Berman: Is there an income level where you would support raising the rates?
Toomey: That’s not a constructive direction to go. We could keep adding brackets and burdens on people who are productive or have a couple of good years in their business but it discourages economic growth. It discourages risk taking. It discourages entrepreneurship. I’m in favor of moving in the direction of a flatter tax system of fewer brackets and lower rates, simplicity where we get rid of the distortions that happen in the tax code, rather than speculating about how many different new brackets we can create.
Berman: On taxes again.. are you okay violating the Pledge?
Toomey: I don’t intend on violating the Pledge. My Pledge is not to support higher taxes. What we are faced with in a few weeks is a massive tax increase. If I can help ensure that we don't have that tax increase, than I believe I have fulfilled my Pledge to fight for the lowest possible taxes.
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Grover Norquist: All Fiscal Cliff Negotiations Need To Be Public
In a discussion today with POLITICO's Mike Allen, Grover Norquist explained that he is not concerned about losing the tax debate as part of fiscal cliff negotiations and urged all negotiations to be in public and online. This would permit the public to know who is being reasonable throughout the process.
“I’m not planning on losing the tax debate we’re having right now. But the tax issue will be more powerful in 2014, 2016 than today,” he said.
“You need to have this conversation in public, you need to be online so you can have the moral the higher ground,” he said. “This is kind of a déjà vu all … with the debt-ceiling thing. And people asked, ‘Do you want to default?’ And I said, ‘No, I want to save two-trillion dollars.’ Which is, by the way, what we did. And, by the way, we won that fight. We got the spending cuts and didn’t get a tax increase.”
He suggested Republicans should push for a one-year extension of all the Bush tax cuts and then demand that Congress come up with comprehensive tax reform as part of any deal to avert the fiscal cliff.
Norquist said by having negotiations in public, Republicans would be able to “change the playing field” from raising taxes to holding Democrats’ feet to the fire over spending cuts. Republicans could have the upper hand by challenging the President on not cutting spending.
“We have a spending problem, not a failure to raise taxes problem,” Norquist said.
Still Norquist said that revenue could be achieved through tax reform and economic growth. Raising taxes, he said, would not solve the country’s economic woes.
“I’m all in favor of real revenue, not imaginary revenue,” he said.