As we discussed last week, we are including in these weekly e-Newsletters a series of articles about the House passed Path to Prosperity Budget. In last week's edition, we discussed the provisions to preserve and protect Medicare for current seniors and for future generations.
Before we continue this discussion, it is important to note that the Budget Act of 1974 requires that the president and the Congress each prepare yearly budgets for the upcoming fiscal year. While the president has submitted budgets to Congress each of the past two years for FY2012 and FY2013, these budgets were rejected by unanimous votes the House and Senate. In fact, these budgets were so flawed that neither of them received a "yes" vote from any Democrats or any Republicans. On the other hand, the Senate, under the leadership of Majority Leader Harry Reid, has openly disregarded our laws and has failed to pass a budget for over 1,200 days. In contrast, the House of Representatives during the 112th Congress has lived up to its responsibilities to the American people and has passed budgets during each of the past two years.
Also, before we discuss tax reform, it is important to realize that the biggest problem with the federal budget is excessive spending, not too little tax revenue. Federal spending has exploded since 2008 and is creating massive deficits, loading debt onto the backs of our children and grandchildren. The wasted taxpayer dollars spent on Solyndra and parties for General Services Administration (GSA) bureaucrats are examples of the irresponsible spending by the Executive Branch of our government. The House is working hard to stop this inappropriate behavior, but we are having limited success in getting the Harry Reid led Senate to join us in these efforts.
In this week's edition, we discuss the comprehensive, pro-growth tax reform provisions that are included in the FY2013 Path to Prosperity Budget and the related H.Con.Res.112 that was recently passed by the House. As a member of the House Budget Committee, I was pleased to work with Chairman Paul Ryan to develop a simplified tax code outline that is based upon real world solutions to make our tax system flatter, simpler, more efficient, and more competitive. More importantly, our proposed tax reform package will restore confidence among job creators so that we can grow our economy and put millions of Americans back to work.
Most American families and businesses feel that our current tax code has become a broken maze of excessive complexity and political favoritism, overgrown with special-interest loopholes and high marginal rates that stifle economic growth and job creation. The Path to Prosperity Budget reforms our broken tax code to spur job creation and economic opportunity by lowering rates, closing loopholes, and putting hard working American taxpayers ahead of special interests.
The Path to Prosperity Budget consolidates the current six individual income tax brackets into just two brackets of 10% and 25%. It also repeals the Alternative Minimum Tax which affects millions more American families than it was ever intended. Our budget's tax proposal reduces the corporate rate to 25% and shifts from a "worldwide" system of taxation to a "territorial" tax system that puts American companies and their workers on a level playing field with foreign competitors. This latter provision will greatly improve the competitiveness of our tax system for American companies and should help reverse the flow of American jobs to other countries.
Our budget also rejects the president's recent proposal to raise taxes on job creators. By stopping his flawed proposal, we can avoid the loss of over 700,000 American jobs (including 57,000 Texas jobs) that would be destroyed according to a recent study by Ernst & Young . Instead, our proposal flattens taxes and broadens the tax base to maintain revenue growth at a level consistent with current tax policy and at a share of the economy consistent with historical norms of 18-19% of GDP. During the drafting of the Path to Prosperity Budget, we had our tax policies evaluated by independent sources to determine their impacts on our economy and American job creation. According to this study, our tax proposals would help create 1% to 1.5% of additional economic growth each year, effectively doubling current economic growth rates.
Now is the time to replace our broken tax code and to make America more competitive. The Path to Prosperity Budget includes "Main Street" provisions to restore our economy and enact comprehensive tax code reform to promote job creation and a stronger economy rather than paying for more reckless spending by a bloated federal government.