Guest Column by John F. Brinson
By now pretty much everyone knows that our deficits and debt are totally out of control, and that Congress seems powerless to do anything about it. The problem predates Obama, but there's no doubt that he has added 40 percent to the national debt in only 21/2 years, and by the end of his term of office next year he will have added 60 percent to the national debt — an increase of $6 trillion!
The Republican-controlled House of Representatives passed a budget that would reduce the deficit by $6 trillion over 10 years. It was met with derision and demagoguery by the Senate Democrats, accompanied by a television ad depicting Rep. Paul Ryan, who proposed the budget, pushing an elderly woman over a cliff.
The Democrat-controlled Senate has not passed a budget since Obama took office. To reduce our deficits, their talk has been focused on tax increases. Obama himself seems bent on taxing the richest Americans. It is clear that the Democrats have no intention of cutting spending and are intent on using class warfare as their main campaign weapon: The wealthiest should pay their fair share. (Hello! The top 1 percent already pay 38 percent of all individual income taxes.)
In a panic to increase the debt limit by the artificial Aug. 2 deadline, Congress enacted the only thing possible in its deadlock: a temporary measure devolving responsibility to a new, 12-person congressional committee charged with deficit reduction. This committee is likely to deadlock as well because the Republicans want to cut spending but the Democrats want to increase taxes.
Now we hear nothing but calls for compromise, but in my opinion the Republicans should not agree to any tax increases or so-called revenue increases whatsoever. Increasing taxes would seriously cripple an already terribly damaged economy. Here's why.
America already has the second highest corporate tax rate in the world (Japan is first at nearly 40 percent) at 35 percent, excluding state income taxes. That number rises to 39.3 percent by including an average state income tax rate. (In Pennsylvania, the combined federal and state corporate tax rate is 44.99 percent.)
This puts our businesses at a terrible disadvantage in world markets. It also encourages armies of lobbyists begging for credits, subsidies and other breaks and encourages corporations to move overseas. Further, we tax individuals on their corporate dividends at 15 percent — with no credit for corporate taxes paid. This is plain stupid, especially in a recession and especially when we need our businesses to be competitive in world markets.
Our personal income tax rates are among the highest in the world. The top 3 percent of our earners pay 50 percent of all income taxes, the next 47 percent pay 47 percent of the income taxes, the next 17 percent of earners pay only 3 percent, and the bottom of 33 percent pay none at all. And yet, in this situation, the Democrats want the top 3 percent to pay even more.
In theory, you might think that raising income taxes would reduce our annual deficits. But the reality is that raising taxes is the last thing we should do, especially in a recession, because it would impede growth and actually result in lower tax revenues.
Look at it this way: When personal income taxes are increased, it leaves taxpayers with less money to spend, and it is spending that drives the economy. To make matters worse, not only is money removed from the marketplace, but it goes to Washington to be wasted on a plethora of unnecessary and wasteful government programs.
The only way for us to ever have a chance to reduce the huge national debt is through tremendous growth in our economy. We must do everything we can to encourage growth, and that means sending signals to the people that government spending will be reduced and taxes will not be increased — on anyone. In addition, it would be a great idea to eliminate most of the new regulations that are strangling our country.
Here's what we can do to spur growth: reduce both the corporate and the individual income tax rates to 20 percent, eliminate all individual deductions, eliminate the capital gains tax altogether, and eliminate the estate tax — a tax that destroys small businesses and farms.
Then, stand out of the way and watch our economy take off like a rocket.
John F. Brinson is chairman of the Lehigh Valley Tax Limitation Committee.
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