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  • Bipartisan Policy Center's "SAVEGO" Is a Free Pass to Tax Hikes

    It seems everyone except President Obama is presenting a detailed plan for dealing with our nation’s rapidly growing debt these days. The latest entry comes from the Bipartisan Policy Council.

    One feature of their plan, “SAVEGO,” calls for automatic spending cuts and higher taxes should Congress not reduce the debt to a predetermined share of the nation’s economy by 2021.

    So, if Congress fails to make necessary spending cuts, or the President vetoes them, the Treasury Secretary would raise tax rates and reduce tax deductions. This is in essence a free pass for the President or Congress to hike taxes without casting a single vote.

    SAVEGO would let Congress off the hook, because it allows them to tell voters that the tax hikes were not the result of their decisions.

    And, the dirty little secret they do not tell you about SAVEGO is that it already raises taxes from the get-go. You have to read the fine print in the baseline budget numbers to see that it eliminates the tax deal passed last December in its entirety: All the remaining 2001 and 2003 tax relief, the various and sundry tax extenders, and the patch to the insidious Alternative Minimum Tax are goners. So SAVEGO would be a tax hike followed by another tax hike. The total tax increase the plan assumes through these baseline high jinks is close to $5 trillion!

    Higher taxes, whether set by the Treasury Secretary or by baseline budgeting shenanigans, would slow economic growth, because they would reduce the incentives for working, saving, and investing. The only way out of our budget problems is to reform entitlements like Social Security, Medicare, and Medicaid and to have a faster-growing economy. SAVEGO’s tax hikes would make stabilizing the debt more difficult and allow Congress to shirk tough choices needed on spending.

    Moreover, ceding power over the tax code to the Treasury Secretary would set a dangerous precedent. Congress is responsible for setting tax rates and determining the tax base. This is how the framers of the Constitution wanted it, and this is how it should remain.

    Voters elect representatives that they feel best reflect their choice for the size of government they desire. The level of taxation is a direct result of this decision. If Congress cedes its power to determine the level of taxation to the Treasury Secretary, it will be turning over the people’s right to self-determination to an unelected representative of the President.

    SAVEGO’s debt “trigger”—with both automatic spending cuts and tax hikes—is far different from having a spending cap enforced by automatic budget cuts should Congress not achieve the required level of cuts. With a spending cap, the specific level of spending for any given year would have been voted on and signed into law, so enforcement would kick in with preset policy choices on spending and taxes debated and established in law. The notion of a 50/50 solution—cut a little spending and raise a little taxes—to solve our spending problem is misguided. And the notion of “capping revenue losses” associated with tax credits or deductions (besides being an Orwellian turn of phrase) is economically flawed, because it ignores the fundamental economics of markets: Changes in tax policy really do cause behavioral changes. If taxes go up, individuals, investors, and businesses adjust their behaviors to avoid taxes. As the old saw goes, if you want less of something, tax it.

    Even the President buys into this ill-advised notion with a tax trigger of his own that would also ultimately result in higher taxes if Congress fails to cut spending. The President’s “plan” also says that the deficit can be lowered substantially by taxing the rich. In fact, doing so would cover only a tiny fraction of the deficits the President’s own budget would create over the next 10 years.

    Plans to reduce the debt should focus solely on cutting spending anyway, since tax hikes are unnecessary to do the job. Enormous deficits and the impending debt crisis they will create in the near future are the result of Washington spending too much. The crisis is not a result of too little taxation.

    SAVEGO unnecessarily calls for the American people to give up too much of their sovereignty and their hard-earned income. The budget created by Paul Ryan and recently passed by the House of Representatives rightly recognizes that giving Washington more of our hard-earned money is not the answer to our budget problems. Instead, it boldly lays out serious solutions to the budget and spending crisis, rather than budget gimmicks and free passes.

    Posted in Economics [slideshow_deploy]

    6 Responses to Bipartisan Policy Center's "SAVEGO" Is a Free Pass to Tax Hikes

    1. jbspinoza says:

      I just have a quick question. Is it ever justifiable to raise taxes for anything? Would you support a war tax? Do you think that a war tax instituted in 2001 to help finance America's incursion into Afghanistan and especially for the pre-emptive invasion of Iraq in 2003. I find it curious that many want to blame expensive entitlements programs (and rightly so as they are burdensome and need reform) yet leave the purview of defense clearly out of the financial equation. When a President simultaneously increases spending (on defense and security) and debases the treasury through a relaxation of taxation it seems almost inevitable that a problem will arise. Unfortunately, the social commitments of America are now in jeopardy. I'm not suggesting that defense be cut in isolation or that entitlement programs be left unscathed. Rather I find it unsettling that some people who claim to be for fiscal responsibility neglect the mismanagement of the economy for the past 30 years and focus on the tried and true formula of higher taxes and social spending = bad for america. The problem is never that simple. There has to be a reasonable solution to this grave problem. Unfortunately people may have to pay more to live in the land of the free. It seems as though some just want to have their cake and eat it too, on both sides of the spectrum. Let's move more towards a measured and balanced approach rather than one that only benefits a small percentage of Americans (the wealthy and mostly white) while simultaneously neglecting the fiscal disaster like Rep. Ryan's proposed budget. President Obama's approach does a better job at balancing responsibility but it still goes too far. Again, let's meet in the middle at a place where no one wins a political victory, but all the people of America win.

      http://psqr.blogspot.com/ http://twitter.com/publicsqr

    2. Bobbie says:

      they refuse to hear the people or acknowledge the costs of burdens they place on the people. We're being led by corruption and fraud and actions of government that protect themselves and not the people they were elected to. Defeats their purpose, doesn't it?????? No one deserves a seat of honor to lead the people of America with those ethics.

      America deserves so much better!

      The GOP needs to SAVEUS from this ugliness in our face and behind our backs. No hidden or otherwise tax hikes! Obama and his bunch need correction to their corruption and irrationality. The more money they get the more they belittle us and stray from the constitution they vowed to uphold. Government gets enough of their way. When will they have mercy on the people they continue to corrupt?

      CUT THE SPENDING!!!!

      Thank you Heritage, for bringing forth issues that may not otherwise be.

    3. Kevin H, college par says:

      It's time to stop listening to the far right fanatics and put tax increases on the table. Over the last 30 years, we've brought the top rate down from 70% to 35% – and the 01 and 03 cuts are a major factor in deficits and debt – it's time to let them tick up a bit – and let the top rate go back to 39.6%. The richest in america have done just fine the last 30 years, i don't think letting the rate go back up 4.6% is going to hut them after it's been cut 35%.

    4. HawkWatcher, Mi. says:

      Middle ground? Tax the rich? I'm just a regular American, but I can certainly educate some of my ignorant countrymen about liberty.

      Suppose the IRS went way beyond "recovering" any tax cuts, beyond any "fair share" that the rich may pay, and seized the complete net worth of top billionaires Bill Gates, Warren Buffet, and Michael Bloomberg. According to a 2009 Forbes Magazine list, this would be about $118 billion dollars for the grabbing. Then, one hundred thousand millionaires could also be hammered for an extra million dollars each, yielding one hundred billion dollars additional revenue, for a grand total of $218 billion dollars. There, we've soaked the rich and our budget shortfall problem is solved, right? Not even close!

      The entire fortunes of Gates, Buffet, and Bloomberg, combined with the extra billions from the hundred thousand millionaires, would not have been enough to cover federal deficit spending for just the month of February, 2011, in which we borrowed $223 billion dollars. In fact, if we tax all billionaires and millionaires at 95%, it will not cover the runaway spending, or address our $14 trillion dollar national debt, which is now on track to double in the next twelve years.

      End of lesson. The federal largesse must be contained; there is no alternative. Government number crunchers show unsustainability that cannot be paid for by any amount of taxing. If one can understand that this is not an option for free people, the proper label is Patriot, not "far right fanatic".

    5. Cindy Macdonald Mapl says:

      There should be no income tax. It was not properly ratified by all the required states in the first place. Tax the imports and tax businesses owned by foreign corporations and foreign individuals capitalizing on our soil. If that doesn't seem to be enough revenue, then cut spending some more. Cut the entitlements. The government pays Humana $11,000 dollars a year for each person that signs over their medicare part B to them. You read that right! $11,000 per year.

    6. Cindy Macdonald Mapl says:

      There should be no income tax whatsoever. No flat tax either. The Income tax amendment was never properly ratified by enough states in the first place to ever become the law of the land. They cheated from the beginning. Nothing should ever be withheld from anyone's paycheck. America can raise revenue by taxing imports and foreign owned corporations and foreign business owners who choose to do business here. If that is not enough revenue to run a basic government, then cut more government jobs, and entitlements, not border protection and real government services the citizens need and are authorized by the constitution. The government doesn't need to be involved in education, food production, drug production, war on drugs (if we had real protected borders that would dry up in a hurry), environmental agencies, energy departments, business bureaus, national forests, endangered species, oil drilling and production and at least a hundred thousand other regulations that the states can and should be handling themselves. We don't need 3/4 of the buildings that are sitting (many of them already are empty) in Washington DC. We don't need to pay the Senators and Representatives and judges and Executives as much money as they get, and there should be no retirement set aside for any of them. They can arrange for that on their own, just like every other citizen in this country is going to have to do.

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