Paul Ryan's Memo
Congressman Paul Ryan pushes back against the left's campaign for massive new tax hikes.
With the White House spinning that Republicans are opposed to a “balanced plan” to reduce the deficit, I wanted to highlight some key points:
- As Speaker Boehner stated earlier today: “Most Americans would say that a 'balanced' approach is a simple one: the Administration gets its debt limit increase, and the American people get their spending cuts and their reforms. And adding tax increases to the equation doesn‟t 'balance' anything.
- The House already passed a budget that puts us on the path to balance, and will vote next week on a Balanced Budget Amendment.
- To get to fiscal balance, the two critical elements required: spending restraint and economic growth. Tax hikes adversely undercut both of these key ingredients.
Some additional background information on these points follows.
A “Balanced Plan”?
- During the past two years Democrats enacted huge tax increases (see today’s Wall Street Journal editorial, “Taxes Upon Taxes”), which were accompanied by unprecedented increases in spending, deficits, and debt.
- While insisting on additional tax increases, the Obama Administration opposed revisiting the huge spending increases in the new health care law or implementing fundamental entitlement reform that would get spending on these programs under control.
- The last time there was a bipartisan budget agreement, it balanced the budget by cutting spending and cutting taxes. The 1997 bipartisan budget agreement between President Clinton and a Republican Congress balanced the budget by bringing spending down to 18.2% of gross domestic product.
Taxes and Revenues (Americans are not under-taxed)
- Expiration of 2001/2003 Tax Relief. Taxes will rise by $3.5 trillion if the 2001/2003 tax relief, the AMT patch, and the estate tax compromise expire at the end of 2012 as scheduled under current law.
- Health Care Law‟s Tax Increases. The health care bill adds another $813 billion in taxes over 10 years. In addition to these taxes, other legislation has increased taxes (the SCHIP extension law included tax increases of $75 billion).
- Tax Engineering. The Obama Administration wants to extend the one-year temporary payroll tax cut (total cost of $112 billion), while increasing taxes on small businesses.
- Tax Increases and the Top Rate. As a result, these tax increases push the effective top rate from 35% today to 44.8%.
- Current Tax Burden. Under current law (before expiration of 2001/2003 tax relief and implementation of the new health care taxes), the top 1% of income taxpayers (over $380,000 in annual income) already pay 38% of income taxes. The bottom half of income taxpayers pay 3% of income taxes.
- Revenues Growing Without Tax Increases. Despite a weak economy and the temporary reduction in Social Security taxes, according to CBO, revenues grew by 8.5% through the first 9 months of this year and expect revenues in 2011 will be $75 billion to $85 billion higher than they estimated in March.
- Republican Budget & Revenues. Under the House Republican budget, which extended tax relief and repealed tax increases in the new health care law, revenues still grow by nearly $2 trillion over the next 10 years.
- President‟s Budget & Tax Increases. The President’s budget increases taxes by $1.2 trillion.
Spending is the Problem
- 24% Increase in Base Spending. Non-defense discretionary spending grew by 24% for the first two years of the Obama Administration, adding $734 billion in spending over the next 10 years.
- Health Care Law Spending Increases. The new health care law included $1.4 trillion increase in spending, including expanding eligibility in Medicaid by one-third and creating a brand new health care entitlement.
- Stimulus. CBO currently puts the stimulus bill’s cost at $821 billion.
- Record Total Spending. The Federal government will spend $3.6 trillion this year, 24% of gross domestic product (GDP) and the highest burden on the economy since World War II. Spending has historically averaged a little over 20% of GDP.
- President‟s Budget & Spending. According to CBO, the President’s budget never spends below 23% of GDP and by the end of the decade is right back at 24% of GDP.
- Republican Budget. The House Republican Budget would cut $6.2 trillion in spending from the President’s budget.