April 13, 2005                                     

The Best Economic Policy

By Congressman Joe Pitts

When he was in office, former President Ronald Reagan proposed cutting tax rates on American workers.  He was harshly criticized by many who believed tax hikes, not tax cuts, were warranted to combat budget deficits and inflation. 

But he said, “I've been told that some members of Congress disagree with my tax cut proposal.  Well, you know it's been said that taxation is the art of plucking feathers without killing the bird.  It's time they realized the bird just doesn't have any feathers left.”

He was right.  The American people simply had no more to give.  His tax relief package ushered in a sustained period of economic growth.  In many ways, we were faced with the same situation in 2001.  Many in Washington were eager to ask for more money from the American people. 

But President George W. Bush and the Republican-led Congress believed that the American people had no more to give.  We believed that if we had asked for more, we would have invited economic catastrophe.  That year, with President Bush’s leadership, we passed the largest tax relief package since the Reagan Administration.   Every American taxpayer benefited.

In fact, if none of this tax relief had become law, in 2004:

  • 111 million Americans would have paid, on average, $1,586 more in taxes;

  • 81 million women would have paid, on average, $1,878 more in taxes;

  • 49 million married couples would have paid, on average, $2,602 more in taxes;

  • 43 million families with children would have paid, on average, $2,090 more in taxes;

  • 11 million single women with children would have paid, on average, $921 more in taxes;

  • 14 million elderly individuals would have paid, on average, $1,883 more in taxes;

  • 25 million small businesses would have paid, on average, $3,001, more in taxes; and,

  • Nearly 5 million individuals and families who currently have no income tax liability would have become subject to the income tax.

So, these were not tax cuts for the rich, as some claimed.  This was government returning real money to real people to be used for real appliances, cars, schools, and savings. 

We got rid of the Death Tax, which forces families to visit the tax collector shortly after saying goodbye to a loved one.  This tax hurts family farms and other small businesses the most.  We also got rid of the Marriage Penalty which penalized married couples for filing jointly.  We expanded the per-child tax credit.  We increased the limit for IRAs from a thousand to five thousand dollars.  We did the same thing with 401(k)s. We increased the Adoption Tax Credit. And we created several new provisions to help parents save and provide for their kids’ educations.

In a few years, however, families face a huge tax hike if we do not do something to stop it.  All of this will happen in six years, unless Congress votes to make the Bush tax relief plan permanent.   Why isn’t it permanent already?   Because liberals in Congress fought it.   They threatened to filibuster it in the Senate.   We were able to avoid that, but only by using a special rule that automatically “sunsets” the bill after ten years.

We need to make the tax cuts permanent.   We need to cut taxes further.   And, as soon as we can, we need to completely overhaul the American tax system and replace it with a flat tax or some other system that will treat people fairly and equally.

I am reminded of this because April 15th is Tax Day.  Each year, the American people spend more money on taxes than they do on food, clothing, shelter, and transportation combined.  For the typical American, this means that he or she pays the equivalent of four and a half months to the government.  That just is not right. 

My motivating principle in saying this was eloquently expressed by President Reagan when he said, “Our loyalty lies with little taxpayers, not big spenders.  What our critics really believe is that those in Washington know better how to spend your money than you, the people, do.”

That’s one of the best economic policies I have heard.  The American family spends its own money better than the American government spends someone else’s. 

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