03.30.08
Pay-Go: Fiscal Responsibility or Political Cover to Raise Your Taxes?
When the new majority implemented “pay-go” spending rules last fall, the American people thought they were getting a check on runaway congressional spending - not an excuse to raise taxes. Congress would offset any dollar of new government spending, we were told, with spending reductions in other areas.
Sadly, this year the majority has done nothing to change its profligate ways. Congress spending proposal came out $23 billion over the presidents budget request, an overall increase of over 10 percent from last years levels. Instead, Democrats have used pay-go as a pretext for a wave of new tax increases. Their strategy, disguised in the garb of fiscal responsibility, threatens to deal a decisive blow to American prosperity at a tense moment for our economy.
How does their stealth work? Consider the ongoing logjam over Congress attempt to patch up the alternative minimum tax (AMT). Because this tax was never indexed for inflation, 19 million additional taxpayers this year will be caught in its ever-expanding web, swelling the ranks of AMT payers to 23 million. Previous congresses have implemented a patch for middle-class AMT payers. But the inaction of this Congress has placed 23 million taxpayers at risk of a $2,000 tax increase this fiscal year.
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You have to smile at Democratic claims that opponents of AMT offsets are trying to pass the costs of the patch on to our children and grandchildren. Thats because another AMT patch would not increase the federal deficit. Preventing 19 million unsuspecting taxpayers from getting clubbed for the first time by an alternative tax hardly constitutes a spending increase or a new tax cut. The government has never collected AMT revenue from these taxpayers and never intended to.
House Democrats refuse to accept that reality. The opportunity to sell tax hikes as offsets is too tempting. Conveniently characterizing the patch as new spending, the House used a one-year AMT fix to muscle through an antigrowth 133-percent tax hike on investment partnerships. The ill-conceived Democratic legislation, which passed last month, increases taxes ostensibly to cut taxes.
The AMT struggle magnifies the differences between the two parties as we formulate tax policy for the future. The Democrats budget baseline for pay-go assumes more than just the revenue from 24 million AMT payers. It assumes that the Republican tax cuts of 2001 and 2003, which lifted us from the depths of recession and fueled extraordinary economic growth, will expire in 2011. Taken together, these assumed revenues amount to an unprecedented $3.5 trillion tax increase on the backs of American families.
The Democrats inflexible adherence to this flawed form of pay-go puts the House at odds with the Senate, which passed a clean AMT patch on Thursday. More importantly, it imperils Congresss ability to put America on sound economic footing. As we slog through a difficult economy, the last thing American families need is to be hit over the head with new tax hikes.
Originaly from Source