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Democrats' Budget: Largest Tax Hike in U.S. History, Huge Spending Increases, No Reforms

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Location: Washington, DC


Democrats' Budget: Largest Tax Hike in U.S. History, Huge Spending Increases, No Reforms

Wisconsin's First District Congressman Paul Ryan, the Ranking Member of the House Budget Committee, expressed alarm at the contents of the House Democrats' federal budget plan during the committee's debate yesterday and following its vote on the proposal early this morning. The budget resolution, which favors tax hikes and major spending increases, was approved by the Budget Committee by a vote of 22-17, with Ryan voting against the measure.

"We can and should balance the budget without raising taxes," Ryan said. "Regrettably, the Democrats' budget plan amounts to the largest tax hike in American history, and it still doesn't get to the heart of the problem - the fact that government is spending taxpayer dollars at an unsustainable rate. In fact, this budget proposal piles on a lot more new spending and doesn't even attempt meaningful entitlement reforms."

"We must do better than this. The longer we put off solving the problem of soaring entitlement costs, the harder it will be for our children - America's future workforce - who would have to bear massive debts and pay twice as much in taxes just to maintain the status quo. We cannot tax our way out of this fiscal chasm. We need to restrain spending and enact reforms that improve the way entitlement programs work. Unfortunately, the House Democrats' budget resolution does neither. While I agree strongly with the goal of balancing the budget by 2012, the tax and spend policies used to get there in this budget will end up driving us right back into deficits, while hurting job growth and our economy. Washington doesn't have a revenue problem; it has a spending problem," Ryan said.

"The budget presents a great opportunity to set our nation on the right fiscal path for the future. Sadly, in this case, it's a missed opportunity. This is why Republicans will be offering a different balanced budget plan next week that instills fiscal discipline, does not raise taxes, and addresses the challenge of entitlement reform."

Congressman Ryan and fellow Budget Committee Member Congresswoman Gwen Moore did succeed in getting an amendment to the budget proposal approved by the committee that helps pave the way for 100 percent of child support payments to get directly to the families they are meant to assist, which is the goal of legislation that Ryan and Moore coauthored last year. This provision expresses the sense of the House that additional legislative action is needed to ensure that states have the necessary resources to collect all child support that is owed and to allow them to pass 100 percent of child support payments on to families without financial penalties.

Based on the information revealed at yesterday's House Budget Committee debate and markup of the fiscal year 2008 budget resolution, here are some of the key points of concern with the Democrat budget plan:

Higher Taxes
The revenue assumptions behind this budget resolution rely on the expiration of the widespread tax relief Congress enacted in 2003, raising taxes on the American people by nearly $400 billion over five years - the largest tax increase in our nation's history.

Failure to renew the tax relief would impact taxpayers by:

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Raising marginal rates on all taxpayers;
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Eliminating the ten percent bracket that has benefited numerous low-income individuals;
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Raising the tax on capital gains and dividends and discouraging investment in our economy;
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Cutting the child tax credit in half;
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Reinstating the marriage penalty;
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Reimposing the death tax.

This budget sets a double standard by assuming that tax relief expires - causing automatic tax hikes - but spending programs continue indefinitely.

Huge Spending Increases
Having already increased current-year spending by $6.1 billion, and adding more than $20 billion to the Iraq supplemental, Democrats are proposing another increase of more than $22.5 billion in nondefense, nonemergency annual appropriations for fiscal year 2008. The budget proposal also sets the stage for future overspending. For the years 2009-2012, it assumes annual nondefense, nonemergency appropriations will increase by an average of 2.4 percent per year, which is still greater than the projected rate of inflation.

No Significant Reform or Offsets
This budget ignores repeated warnings from individuals, including the Comptroller General of the Government Accountability Office (GAO) and the Chairman of the Federal Reserve, about the rapidly escalating costs of entitlements. It puts off any significant reform for at least five years - allowing the problem to worsen.

Gimmicks
Among the gimmicks in this budget are the "reserve funds." Instead of providing funding for promised initiatives, the budget proposal includes ten reserve funds that promise extra funding for pet initiatives if offsets are included. The reserve funds have no real effect because budget rules already permit initiatives not assumed in the budget to be financed by offsets.

Note also that this budget plan fails to provide even a one-year patch, let alone a permanent reform of the alternative minimum tax (AMT). Instead, this budget employs a "reserve fund" that allows AMT relief only if offset by equivalent tax increases or spending cuts - which are not spelled out.


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