Prevent Higher Taxes and Build a Stronger Economy
This month marks the annual tax deadline for millions of Americans to file their income taxes. President Ronald Reagan once said that one of the ways government approaches the economy is "if it moves, tax it." Unfortunately, the economy must have done a lot of moving, because the Federal government has collected record high tax revenues. Almost every activity we do requires paying some sort of tax to the local, state, or Federal government - the water we use to brush our teeth, the gasoline we purchase to get us to work, the lunch we buy at a local restaurant, the electricity we use to power our homes, and as we all know, the income we earn from our hard work. We are taxed with great frequency, and often times when we don't even know it, we are taxed some more.
This is not without consequences. In 2007, according to the nonpartisan Tax Foundation, Tax Freedom Day was May 5; it took California taxpayers, on average, over four months and four days to earn enough to pay off their local, state, and federal tax burden. Compared to just four years ago, that amounts to 14 more days of work in order to pay off taxes. More fundamentally, that means less money in our pockets to save and spend on our families.
This cannot happen at a worse time. Our economy has not been stable; the stock markets have been fluctuating, home prices have been falling, and gas and grocery bills have been rising faster than in almost two decades. Many families have been forced to make hard decisions and change how much they spend for everyday needs. The last thing we need at this time of economic uncertainty is more taxes and a heavier tax burden.
Hardworking California families are reassessing their spending habits to make ends meet, and the least that Washington can do is to do the same. We have heard a lot about government bailouts, but the worst thing Washington could do in this current economy is to propose the largest tax increase in American history, in order to raise more revenue to "bail out" the unwise and irresponsible Federal spending decisions. We can fund the programs we need to fund without resorting to raising taxes, because the Federal government does not have a revenue problem, it has a spending problem. Last year, Federal revenues were 18.8% of GDP, a high from a historic perspective. Enough revenue is collected, which is why we must reject increases in our taxes, hold the line on spending, and actually ask the tough questions about Federal spending, so that we can justify why a program is funded, at what level, and whether the program is beneficial and is accountable to the American taxpayer. More broadly, we need to look at how large the Federal government is growing each year. For instance, some economists believe that Congress can balance the budget in the next couple of years by only increasing Washington spending by two percent annually, instead of 4.5% per year. Finally, we should strengthen, not weaken, programs to detect fraud, collect unpaid taxes, and reduce overpayments in our government programs.
But there are those in Washington that believe we must increase taxes, and they approved a budget blueprint that would do just that. What does that mean for middle-class families? If these tax increases pass, a family of four earning $50,000 annually would pay on average $2,155 more in taxes each year. This includes increasing the tax burden by $500 if you have children, since they propose to cut the child tax credit in half from the current level of $1,000 to $500. Small businesses, the largest U.S. job creator, would lose important tax relief from last year, which helped some of those small businesses keep their doors open. Finally, the unfair "death" tax would be resurrected from its grave after 2010, taxing families for handing down their family farm or small business or hard-earned nest-eggs to the next generation.
Taxpayers deserve better. That is why I have cosponsored the Tax Increase Prevention Act, which would prevent those taxes from increasing and stop the largest tax increase in American history. Further, I support legislation that would simplify our tax system by repealing the Alternative Minimum Tax (AMT) and allowing Americans the choice to calculate their taxes based on only two simple tax rates, beefed up by a large standard deduction and personal exemptions. For the majority of Californians, this tax relief and tax simplification would be welcomed and embraced. But there is a minority that believes that more taxes need to be paid to fund more government programs. And to help those, I recently added my name as a supporter for a third bill, the "Put Your Money Where Your Mouth Is Act of 2008," which would change tax law and allow taxpayers to pay more taxes if they voluntary wish to do so.
In a time of economic uncertainty, Congress can provide American families and businesses the certainty of a pro-growth economic environment that rewards innovation and hard work by passing tax relief and by spending taxpayer money more responsibly. We can do that by working together in a bipartisan manner and making the tough choices necessary to lead our economy today and in the future.