The House Budget Committee this morning released a ten-year balanced budget plan that does not raise net taxes. The blueprint will bring the federal budget into balance by the end of the decade by capping discretionary spending, reforming entitlements and getting the nation’s debt under control.
Spending Restraint
The House GOP budget is the only blueprint offered by leaders in Washington that balances – and it does so by the end of the ten year budget window and without raising taxes. Families and employers balance their budgets every day; the plan put forward today by the House Budget Committee shows it is time for lawmakers to do the same.
- Brings spending in line with historical revenue levels. Spending has averaged 21 percent of GDP in the modern era; the House GOP budget brings outlays down to 19 percent. This balances the budget not on the backs of taxpayers, but by forcing politicians to come to terms with their spending priorities
- Enforces BCA spending levels. The plan maintains and extends the Budget Control Act’s spending levels, leaving in place spending reductions promised to taxpayers.
- Slows out-of-control spending. The House GOP budget lops $4.6 trillion from outlays over the next ten years. This means federal spending will rise at 3.4 percent, rather than 5 percent, for the next ten years.
Mandatory Reforms
- Saves Medicaid from federal control. The House budget removes the federal incentives that increase Medicaid enrollment and prevent reform. The plan also repeals Obamacare Medicaid expansion, saving states from their own budget crises that would follow once the federal funding for the expansion runs out.
- Reforms the social safety net. The plan addresses the rocketing costs of low-income assistance programs by repealing institutional incentives to increase participants. The plan strengthens work requirements for the TANF program which have proven to reduce welfare rolls.
- Saves Medicare for future generations. The GOP House budget will offer health care choices to seniors that will decrease costs by allowing private insurance companies to compete with Medicare. The plan maintains federal support for insurance premiums—regardless of what plan a beneficiary chooses.
Tax Reform without Raising Taxes
On the revenue side, the House GOP budget calls for no net tax increase. The current law revenue baseline (19 percent of GDP as a durable revenue target) is adopted, meaning the government will have to live within its means. Taxpayers already send far too much of their income (higher than the historical average) to Washington, and should not be asked to write an even bigger check to the IRS. The fiscal cliff already raised taxes by $600 billion. $1 trillion of Obamacare taxes came online with the fiscal cliff. Taxpayers are doing their part, and then some. It's time for the big spenders to start doing theirs.
The budget also makes sure that the government's tax take is less destructive to jobs and economic growth. It works in tandem with House Ways and Means Committee Chairman Dave Camp's (R-Mich.) ongoing comprehensive tax reform efforts. To this end, the budget gives the broad outlines of a far simpler and easier to comply with tax system which:
- Simplifies tax brackets. Replaces the current seven-bracket income tax (top rate of 39.6 percent) with a simple, two-bracket system of 10 and 25 percent
- Eliminates the Alternative Minimum Tax (AMT), which forces millions of taxpayers to calculate their taxes two different ways and pay the higher result
- Cuts the corporate income tax rate down to 25 percent. The U.S. corporate income tax rate is the highest in the developed world, so lowering this rate closer to the average marginal rates of our competitors is a necessary step in bringing jobs and capital back to the United States
- Implements international tax reform. This budget envisions transitioning the tax system toward a more competitive system of international taxation. Under current law, U.S. employers often have to face taxation abroad and from the IRS on the same income earned overseas. This puts our employers at a big competitive disadvantage.
Most importantly, this budget envisions tax reform taking place within the fixed tax revenue target of current law. "Tax reform" would not become a code word for "tax hikes," as too often happens in Washington. Tax reform is not about bringing in more tax revenue to the government. It's about bringing in the same amount of revenue more intelligently, with lower tax rates and a tax base which subjects all consumed income to taxation once and only once.
Obamacare Repeal
The FY 2014 budget repeals Obamacare. This common sense idea saves $1.8 trillion in spending on a program the American people never asked for and don't want. Implicitly, the budget also repeals the $1 trillion in new Obamacare tax increases by re-purposing that money within comprehensive, revenue-neutral tax reform. Obamacare is replaced by consensus-driven reforms to healthcare like ending the tax bias in favor of employer-provided health insurance, moving toward a consumer driven healthcare model where patients--not insurance companies or government bureaucrats--are put in charge of their medical decisions, and medical liability reform.
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