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June 5, 2012

Take Tax Increases Off the Table

By

There’s a plan afoot to hike your taxes after the November election. Who woulda thunk it?

According to Americans for Tax Reform, President Obama has already signed 21 tax hikes into law that hammer middle class and low income taxpayers. Included are a massive tax hike on tobacco, ObamaCare individual mandate surtaxes, ObamaCare employer mandate taxes, ObamaCare taxes on indoor tanning, and something called the “economic substance doctrine” that empowers the IRS to remove tax deductions from the code without the consent of Congress. Americans are already overtaxed.

Now there is widespread fear that some Republicans may go wobbly on holding the line against tax increases. Instead, they might agree to raise taxes now in exchange for promises of future spending cuts—cuts that probably will never happen. What animates these fears is word that former Republican Senator Alan Simpson and Erskine Bowles, President Clinton’s former Chief of Staff, a huddling with Republican and Democratic lawmakers to revive the 2010 Simpson-Bowles tax-hiking plan.

Not all Republicans will be tempted. But if enough fall for the false argument that we need a Grand Bargain of tax hikes and spending cuts to reduce debt caused by over-spending in the first place, then Americans will wind up paying more for a government that already spends way too much.

According to Reuters, Bowles and Simpson are “working with a bipartisan group of 47 Senators and as many House members to frame a compromise on $7 trillion in looming fiscal decisions.” Bowles was quoted as saying “I believe this group will come together during the lame duck.” They are planning this attack on your wallet after the November elections so that you, the taxpayer, have no opportunity to express your displeasure at the polls.

Government is already too big. Sen. Mike Lee (R-Utah) believes that spending should be held at 18 percent of Gross Domestic Product (GDP)—the average for the modern era. James Pethokoukis of The American Enterprise Institute calculates that spending as a percentage of (GDP) averaged 20.5 percent under President George W. Bush and skyrocketed further under President Obama to 23.4 percent. That statistic alone indicates spending must be cut dramatically.

Reasonable spending cuts are on the table. Sen. Tom Coburn (R-Okla.) has released “Back in Black,” a plan to cut $8 trillion. Senators Rand Paul (R-Ky.), Mike Lee and Pat Toomey (R-Penn.) have all rolled out budget plans that balance the budget without tax increases over the next few years. A Balanced Budget Amendment to the Constitution (BBA) with a spending limit provision and a tax limitation provision is also a reasonable alternative. The Senate BBA received 47 votes last December.

Something called “Taxmageddon” and pending defense cuts are being used to scare some squishy politicians into supporting a Lame Duck tax hike.

Heritage Foundation tax expert Curtis Dubay describes Taxmageddon as a “perfect storm” of expiring tax cuts and ObamaCare tax hikes. Unless Congress acts, a long list of existing tax cuts, credits and deductions will expire next January 1. The list includes the Bush tax cuts ($166 billion), the payroll tax cut ($125 billion), the Alternative Minimum Tax) patch ($119 billion), tax cuts from 2009 Stimulus ($21 billion), tax extenders ($20 billion), death tax at 35 percent with $5 million exemption ($13 billion), and 100 percent expensing for business investment ($8 billion). ObamaCare tax hikes will add another $23 billion jump in taxes—making for a $494 billion tax hike in total.

Add in the massive spending cuts to defense programs scheduled to hit in January as a result of the debt limit deal and you have motivation for politicians to take action. Congress is very good at two things: doing nothing and overreacting. Many fear that they will overreact and agree to a plan that includes higher taxes.

The greatest threat is a Simpson-Bowles plan containing a $1 trillion tax hike. “Make no mistake about it,” Dubay tells Townhall, “Simpson-Bowles is a massive major tax hike.”

It would be a grave disservice for lawmakers to enter into secret negotiations for the purpose of sneaking though tax hikes on the American people. Especially when spending reduction ideas already on the table offer a far more reasonable alternative.

Brian Darling is Senior Fellow in Government Studies at The Heritage Foundation.

This article originally appeared on Townhall.com on June 4th, 2012.

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