We Need Spending Restraint, Not Tax Hikes
As Tax Day looms, American families and employers are keenly aware of the deep cut the government is taking out of their household incomes and hard-earned profits. A heavy tax burden means that consumers have less to spend in the economy and businesses have less for hiring, expanding, and investing.
When taxes go up, the rate of economic growth goes down. And even though economic growth is what we badly need to hasten our recovery, many leaders in Washington are hungry for even more tax revenue. Some still champion a big government agenda that requires greater resources to implement more programs. To pay for it, Senate Democrats recently passed a budget with another $1.5 trillion in tax hikes. Some lawmakers are also calling for higher revenue to address our $16 trillion debt and trillion-dollar annual deficits. Rather than scale back the agenda or look for serious savings, they believe that the answer is to simply raise taxes, not slow spending.
To keep our economy humming and put the government back on sound fiscal footing, we must undertake comprehensive tax reform and exercise real spending restraint through fundamental entitlement reform.
Comprehensive tax reform should broaden the tax base and simplify compliance. The U.S. corporate tax rate—one of the highest in the world—must be lowered so that American companies can compete in the global economy. Likewise, businesses that file their taxes as individuals suffer from some of the highest rates among developed economies—they also need relief in the form of lower rates. Finally, it is important that we move to a territorial system so that American companies operating overseas aren’t taxed twice on their earnings—once at home and once abroad.
Tax reform must be done in conjunction with spending restraint—and there is no greater driver of deficit spending than our entitlement programs. Spending on Medicare, Medicaid, and Social Security already accounts for nearly 58% of all federal spending. If Congress doesn’t act, within a few decades, automatic spending will consume virtually all of what the government collects. These programs must be reformed so that they are solvent for future generations and don’t drive our nation to bankruptcy. The sooner we make commonsense reforms, the less painful the changes will be.
Some leaders in Congress have signaled their support for undertaking comprehensive tax reform. Still others are at least willing to talk about entitlement reform, which is a big step forward. It’s up to the business community to keep the pressure on Washington to make the tough decisions now.