Eric Cantor offers a moment of clarity in the debate over extending the existing tax rates and what it really means for both taxpayers and the direction of government in the US. These are not tax cuts; the cuts occurred in 2001 and 2003, and have been the status quo for years. Barack Obama and Democrats want to allow an automatic rate increase — a tax increase — because they need the cash for their failed economic and regulatory regimes:
As the failed stimulus illustrates, a government redistributing hundreds of billions of dollars—much of it to achieve social and political goals—is far worse at allocating capital and creating jobs than private industry. This year’s battle over taxes is thus a fight to allow businesses, taxpayers and private industry to keep more of their money so that they can provide real stimulus and lasting growth to the economy.
Yet it would be a mistake to view this tax increase in isolation. It must be seen in tandem with passage of the new health-care entitlement (enacted at a time when we should be exploring how to preserve and strengthen our current entitlement programs), the stimulus, and the 2,000-plus page labyrinth of new financial regulations. The reality is that this tax hike is just one more step along the way to creating an anticompetitive new norm in this country marked by bigger government, less growth and structurally higher taxes and unemployment.
The strategy to achieve the progressive left’s endgame is simple. First comes the provocative class warfare rhetoric. Second comes the vast assumption of government control over the economy. Third comes the growth of government spending and entitlements. And alas, higher taxes on our nation’s job creators and workers.
The only way out of this economic morass is through innovation, entrepreneurship and economic freedom. President Obama’s impending tax increase is not just a hike on a few “millionaires and billionaires,” as the White House tries to frame it. Roughly half of all small business income in America will face a higher rate, making this tax increase a direct assault on job creation and innovation. Coming from an administration heavy on officials with no business experience, this is a clear signal that the White House is determined to continue to spend recklessly and expand the entitlement net.
That’s why we’re not backing down.
The Heritage Foundation properly labels the Obama tax hikes in its analysis of the impact of raising taxes on the “wealthy.” Far from a benign source of fresh cash for spendaholics on Capitol Hill, the impact of the increase would result in job destruction and further decreases in disposable income:
Contrary to what you hear from the White House, the Obama tax hikes do not just hit the wealthy. Economic life at all levels is so tightly interwoven that tax increases for one segment of the population will ultimately affect everyone. Nearly everyone will pay something, either in lower income, higher interest rates or more expensive products, to name just three economic pains the Obama tax hikes will inflict on the economy. The Heritage Foundation’s Center for Data Analysis has run simulations using their Individual Income Tax Model comparing current law with President Obama’s most recent budget proposal which includes: 1) higher taxes on individuals earning more than $200,000 and couples earning more than $250,000; 2) higher taxes on capital gains; 3) higher taxes on dividends; and 4) the return of the death tax. The CDA found that the Obama tax hikes would:
- Destroy an average of 693,000 jobs every year.
- Drain $726 billion from disposal income, $38 billion from personal savings, and $33 billion from business investments.
- Raise taxes on the 55% of all joint filers earning more than $250,000 who run small businesses that employ others.
- Cost the average non-farm small-business owner $3,500 more in taxes.
- Cost the 49% of all seniors with income below $250,000 $525 in additional dividend taxes.
- Cost the 25% all seniors with income below $250,000 $742 in higher taxes.
The bottom line is clear: All Americans would suffer economic harm under the Obama tax hikes.
As Conn Carroll correctly diagnoses, the real problem with the federal government is spending, not revenue. By seizing more capital, the Obama administration would make that problem worse. Instead of finding new ways to drain capital from the market, the federal government needs to find ways to spend less — much less — and put capital back to work in the private sector. Ironically, the people who stand to gain most outside of the public sector will be the large corporations, which will face less domestic competition as small businesses either fail or cannot expand to meet any future demand.
These are tax hikes, and they are coming at exactly the worst time imaginable.
Addendum: The NRCC launched its Tax Tracker today. Be sure to check out the positions of House Democrats on tax issues in this session of Congress.