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LAMBRO: Taking a stab at deficit reduction standoff
Toomey plan might be supercommittee’s last chance
Question of the Day
The freshman Pennsylvania Republican has impeccable conservative credentials. Before he ran for the Senate last year, he ran the Club for Growth, an anti-tax, pro-business political action committee that supported GOP House and Senate candidates who fought tax hikes, even knocking off some pro-tax Republican incumbents in party primaries.
Mr. Toomey’s move was denounced by the Democrats who refused play his game, saying his plan didn’t do enough to raise revenues. It also opened up a deeply divisive split in his own party.
Rep. Jeb Hensarling of Texas, the Republican co-chairman of the supercommittee, has sided with Mr. Toomey, as have other Republicans, including party leaders. But dozens of members see his plan as a betrayal of the GOP’s position against raising taxes at any time, especially in the middle of a weak, high unemployment economy.
Rep. Patrick T. McHenry of North Carolina, who calls Mr. Hensarling one of his mentors, gathered more than 70 signatures from House Republicans this week on a fire-breathing letter to the panel’s leadership that called any tax increases “irresponsible and dangerous to the health of the United States.”
But the headlines and the stories about Mr. Toomey’s tax plan leave out a critical component. While it would cap a number of itemized deductions that taxpayers take, thus raising their taxes, it would also offset those increases by lowering income tax rates across the board.
Under Mr. Toomey’s plan, all of the income tax rates would be reduced by as much as 20 percent, lowering the top rate from 35 percent to 28 percent. The 10 percent bottom tax rate, created under President George W. Bush’s 2001 tax cut law, would drop to 8 percent.
The details of these deduction caps are not clear right now and as a chief analyst of a major business lobbying group told me this week, “the devil is in the details.”
Overall, Mr. Toomey’s plan would reportedly raise $400 billion in additional tax revenue, though an estimated $110 billion of that would be derived from higher economic growth and increased employment.
Supercommittee Democrats argue that his plan would hand huge tax cuts to the wealthy. But GOP aides say that most people in higher income brackets usually take many more deductions to lower their taxable income, so they would on average see their taxes go up.
President Obama and the Democrats are fixated on raising taxes on people who make more than $200,000, as well as small businesses who file as individual taxpayers, major corporations and investors, by raising their capital gains tax rate.
But these taxpayers pay the lion’s share of all income taxes. Raise taxes on capital gains and you will get less venture capital investment and a weaker economy. Fewer Americans will sell assets they hold to plow their gains into higher-performing growth investments if the capital gains tax rates take a bigger bite out of their profits.
Without knowing the full details of Mr. Toomey’s plan, he is following a tried and true fiscal path to economic growth. We’ve had many recessions and downturns in the last five decades, and lowering the tax rates have always helped our economy recover and made it stronger than before.
The Kennedy across-the-board tax rates in the 1960s. The Reagan tax cuts in the 1980s, followed by the broader and bipartisan tax reforms of 1986 that got rid of a number of tax breaks, exemptions and other loopholes in order to lower the rates, cutting the top marginal rate to 28 percent as Mr. Toomey would do now.
And let’s not forget the Republicans’ pro-growth capital gains tax cut President Clinton signed in his second term that unleashed a wave of high-tech capital investment that led to full employment and a budget surplus.
About the Author
By Michael P. Orsi
Edward Snowden should declare his patriotism in court
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