THE INTERNET TAX MORATORIUM EXPIRATION

COUNTDOWN

Tell the Senate
to Make the
Moratorium
Permanent.
Click Here to Sign the Petition Before It's Too Late.
00
DAYS
00
HOURS
00
MINUTES
00
SECONDS

Myths and Facts About the Taxpayer Protection Pledge


Posted by Ryan Ellis on Wednesday, June 20th, 2012, 4:24 PM PERMALINK


Myth: Pledge Signers Are Pledging Loyalty to Grover Norquist and/or Americans for Tax Reform

Fact: That’s not what the Pledge says.  Signers pledge to the taxpayers of their Congressional district (or state in the case of senators) and to the American people that they won’t support a net income tax increase.  The Pledge is made in writing to voters before a politician is elected so that these voters can hold the politician accountable on the tax issue.  Pledge enforcement is done by voters, not by Grover Norquist or Americans for Tax Reform.


Myth: The Taxpayer Protection Pledge “Ships Jobs Overseas.”

Fact: This baseless assertion had its origins in the bowels of the DCCC.  It makes no logical sense.  It has been debunked by several large fact checking services, including FactCheck.org, Politifact, and the Associated PressFactCheck.org called the charge, “blatantly false.”  They further noted that, “[The Pledge] leaves ample room for elimination of any number of special tax breaks so long as the overall level of taxation is not increased. To claim that this ‘protects’ any particular provision of the tax code is simply untrue.” The AP said that, “the pledge… makes no promise to protect [particular tax preferences or taxpayers]. It says nothing about jobs. It's a pledge to oppose tax increases.”  As you will see below, the Pledge does not protect any particular tax preference.


Myth: The Pledge Protects Particular Tax Deductions or Credits.

Fact: Every single exclusion, adjustment, deduction, and credit is on the table for tax reform under the Pledge.  No tax break is exempt from elimination under the Pledge.  The only requirement is that the additional tax revenue raised by eliminating (or curtailing) a tax break get plowed into lower marginal tax rates (or other income tax relief).  A good example of how this is done can be found in Congressman Mike Pompeo’s H.R. 3308, the “Energy Freedom and Economic Prosperity Act.”  His bill eliminates targeted energy tax credits, and uses all the resulting tax revenue to lower the corporate income tax rate dollar-for-dollar.  ATR has endorsed this Pledge-compliant legislation because it’s good tax policy and good energy policy.


Myth: The Taxpayer Protection Pledge Gets in the Way of Comprehensive Tax Reform

Fact: The Pledge was created at the request of President Reagan in order to help pass the 1986 Tax Reform Act, the most comprehensive tax reform legislation of all time.  The Pledge helped keep that bill tax revenue-neutral: all base broadening was directly rolled into lower marginal tax rates.  As a result of that Act, the top individual income tax rate fell from 50 percent to 28 percent.  It was only when the discipline of the Pledge was abandoned by Presidents George H.W. Bush and Bill Clinton that marginal tax rates rose (as President Obama himself is proposing to do today).  The tax code after 1986 was simpler and easier to comply with for most families, and at far lower marginal tax rates than what preceded it.

Today, the Pledge prevents politicians from raising taxes by eliminating this-or-that tax preference by itself.  Rather, the Pledge tells politicians that such base broadening is acceptable only in the context of tax reform—broaden the base, lower the rates, and don’t raise the net tax burden in the aggregate on American families and employers.  A tax preference eliminated today is a tax preference not available for tax reform tomorrow.


Myth: The Pledge Is What’s Preventing Republicans and Democrats from Striking a “Grand Bargain” to Fix the Budget

Fact: Actually, the Pledge makes it easier for Republicans to negotiate with Democrats.  Net tax hikes (not to be confused with higher tax revenues resulting from pro-growth tax policy) are off the table for Pledge-signing Members of Congress.  That means that the focus of negotiations will remain right where the problem actually is—Washington’s over-spending problem.  You don’t solve an overspending problem by raising taxes (in fact, that only makes the problem worse).  You solve an overspending problem by cutting spending and reforming entitlements.

Republicans gave into tax hikes twice before, with disastrous results.  In 1982, President Reagan was promised $3 in spending cuts for every $1 in tax hikes.  The tax hikes went through, but the spending cuts did not materialize.  President Reagan later said that signing onto this deal was the biggest mistake of his presidency.  In 1990, President George H.W. Bush agreed to $2 in spending cuts for every $1 in tax hikes.  The tax hikes went through, and we are still paying them today.  Not a single penny of the promised spending cuts actually happened.  The Pledge kept the focus 100% on spending in 2011 and 2012.  

Even President George H.W. Bush said that the 1990 tax hike deal was a mistake when he was running for reelection in 1992: “I’m very disappointed with Congress. I thought this one compromise – and it was a compromise – would result in no more tax increases. I thought it would result in total control of domestic discretionary spending. And now we see Congress talking about raising taxes again. So I’m disappointed, and given all of that, yes, a mistake.”

Going forward, the Pledge will continue to prevent a 1982/1990 disaster from ever happening again.  Instead, the House GOP budget will be the model for fixing Washington’s overspending problem—reform entitlements, cut spending, and do revenue-neutral tax reform.

More from Americans for Tax Reform

hidden