At a time when Wisconsin is facing economic uncertainty and a high unemployment rate, taxpayers have been shouldered with $670 billion of tax increases ($2,100 for every man, woman and child in the United States) since January 2009. In that period, President Obama and the Democratic Majority enacted $2.1 trillion in new government spending. I voted against these increases in taxes and spending.
Instead of chasing this type of ever-higher spending with ever-higher taxes, Congress needs to focus on providing incentives for workers, entrepreneurs and families to put our economy on the path to recovery. To address these issues facing our country, I have introduced legislation, "A Roadmap for America's Future." My bill removes the competitive disadvantage our tax code places on American-made products and creates a simpler, fairer income tax system for American taxpayers. As Chairman of the House Budget Committee, I will continue to work to balance the budget, stop tax increases, and put in place policies conducive to economic growth.
LOOMING TAX INCREASES
Recently, the Obama Administration and Congressional leaders agreed on a bipartisan "framework" to address the looming expiration of the 2001 and 2003 tax relief measures, the recent expiration of federal Unemployment Insurance benefits, and a host of other tax issues. The Senate passed the bipartisan framework as H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, by a vote of 81-19, and on December 17, 2010, H.R. 4853 passed the House of Representatives by a vote of 277-148 with my support.
The legislation includes:
* An extension of income tax rates for all Americans at current levels through December 31, 2012
* A 13-month extension of federal Unemployment Insurance benefits
* Two years of estate tax relief at levels of 35% with a $5 million exemption
* An extension of capital gains and dividends tax rates at their current levels
* A two-year "patch" of the Alternative Minimum Tax (AMT) to ensure that no additional taxpayers face an unintended tax hike
* An extension of a variety of other provisions, including the Child Tax Credit, "Marriage Penalty" relief, and the Earned Income Tax Credit (EITC)
Most importantly, I am encouraged that the package prevents across-the-board tax hikes from hitting American families and job creators for two years, and I will continue to fight to make the 2001 and 2003 tax relief measures permanent. Until a permanent extension can be enacted, I believe the two-year extension in H.R. 4853 is critical to prevent further damage to our fragile economy.
I believe that Washington has a spending problem, not a revenue problem, and I will continue to push for efforts to ease the burden placed on hard-working Americans and stop further tax increases.
INCREASING THE TAX BURDEN
New Health Care Taxes
Most of the tax increases enacted since January 2009 are included in the new health care law, the Patient Protection and Affordable Care Act (H.R. 3590). This law will enlarge government, increase Federal spending, deficits and debt. It initiates a government takeover of the health care sector (one-sixth of the U.S. economy); increases total spending by $2.6 trillion; raises taxes by more than a half-trillion dollars over the next 10 years (the largest tax increase in history) and cuts more than a half-trillion dollars from Medicare to finance a new entitlement. For these reasons, I voted against this legislation.
The largest single tax hike in the health care law ($210 billion) results from the 0.9 percent increase in the Medicare payroll tax on wages for employers and small businesses, and a new 3.8 percent Medicare surtax on net investment income. The threshold amounts for these surtaxes are not indexed for inflation so these taxes that are aimed at "wealthy" individuals today, will reach increasing numbers of middle-income taxpayers over time, just as the Alternative Minimum Tax has.
The new health care law also provides $10 billion to expand the IRS, which will be in charge of verifying that every American taxpayer has obtained health insurance defined under this new law. Taxpayers who fail to prove that they have the health insurance required under the health care law, face a new tax up to up to $2,250 or 2 percent of the taxpayer's income (whichever is greater). The new law, however, includes an exemption for illegal aliens and incarcerated individuals. Incarcerated individuals are exempt because they receive taxpayer-funded health care in prison. Though illegal aliens cannot received tax credit or Medicaid coverage under the health care law, they may receive emergency room care but do so without paying the same penalty that uninsured Americans must pay. According to the Congressional Budget Office and Joint Committee on Taxation, nearly half of the taxes collected from this law, would be paid by households earning less than 300% of the Federal Poverty Line ($66,150 for a family of four).
Taxes in the President's Budget Proposal for Fiscal Year 2011
Although the budget process in Congress has come to a standstill, in February 2010, the President proposed a budget that more than doubles the debt, drives spending to a new record of $3.8 trillion in FY 2011, pushes the deficit to a new record of $1.6 trillion in FY 2010, and raises taxes by over $2 trillion through 2020.
* Taxes -- The President's budget proposal increases taxes by more than $2 trillion over 10 years. These tax increases include increasing taxes on small business owners with a top marginal rate of nearly 40 percent and an increase on the capital gains and dividends tax.
The President's budget proposal does not offer solutions to address these unsustainable spending, deficit and debt levels. Instead, under the President's budget proposal, this task has been delegated to a Fiscal Commission to put forward recommendations until after the 2010 elections. I have been appointed to this commission, but it remains unclear whether Congress will take action on the budget this year.
AN ALTERNATIVE TO TAX INCREASES
A Roadmap for America's Future
The Federal tax code is needlessly complex and burdensome. Taxpayers and their families face, in the next few years, higher taxes, the reinstitution of the marriage penalty, and the Alternative Minimum Tax (AMT), which becomes a larger problem every year. I believe that Washington must put the taxpayers first--not the government. To address these problems, I have introduced legislation, "A Roadmap For America's Future" which in addition to addressing the challenges facing the future of health care, Medicare and Social Security, provides a flatter, simpler system for taxpayers to pay their income taxes and levels the playing field for American-made products to compete against foreign competitors making it easier for American manufacturers to keep jobs in the U.S. My legislation would do the following: (1) permanently repeal the individual AMT; (2) provide individuals an alternative tax system that is fair, simple and efficient; and (3) replace the current corporate income tax code with a tax system that levels the playing field for American businesses. For individual taxpayers, taxpayers can choose the new, simplified system or stay with the current tax code or whichever option suits them. Specifically, my bill provides:
*Two income tax rates: 10 percent on taxable income up to $100,000 for joint filers, and $50,000 for single filers; and 25 percent on taxable income above these amounts.
*That taxable income equals gross income minus a standard deduction and personal exemption. The standard deduction is $25,000 for joint tax filers, $12,500 for single filers. The personal exemption is $3,500. The combination is equivalent to a $39,000 exemption for a family of four. There are no additional credits or itemized deductions.
For businesses, my bill replaces the corporate income tax system that puts American-made products at a competitive disadvantage, and replaces it with a low 8.5 percent Business Consumption Tax (BCT) to level the playing field for American-made products to compete against foreign competitors. Consider the following example: Right now, Case New Holland tractors are at a competitive disadvantage against its foreign competitor, Komatsu, because of the current U.S. tax code. When Komatsu tractor leaves Japan, Japan lifts its tax on the tractor, and it arrives in the U.S. tax free. But when the Case tractor rolls off the assembly line in Racine and is exported to Japan, the U.S. taxes it first and then Japan taxes it again as it arrives as a U.S. import. This hurts American jobs and puts American businesses at a competitive disadvantage. The Roadmap proposal would end these backwards tax policies and put American workers in the position to thrive, instead of struggling to survive, in this period of economic uncertainty.