Tax Time

Floor Speech

TAX TIME -- (House of Representatives - March 12, 2009)

Mr. McCLINTOCK. Mr. Speaker, many people were quite relieved when President Obama promised to reduce taxes on 95 percent of Americans. Last week, the President introduced his new budget that depends upon a staggering tax increase of $1.4 trillion over the next 10 years. If that fell on every one of us, that would come to nearly $15,000 for an average family of four, or about $1,500 per year, out of that family's paychecks. So what a relief it was to hear the President's assurances that that is only going to be a tax on the rich. Except, it is not.

As we begin dissecting the President's new taxes, it is becoming crystal clear that they are actually hitting squarely at the middle-class, working families who are struggling to make ends meet in the worst economy in a generation. Let me walk you through the reasons why the President's new taxes are something that every middle-class family should fear.

There are about $650 billion of direct tax increases, including a boost in the income tax of nearly 40 percent. Now, that is the part that the President says will only be on the very wealthy, which he defines as people making $125,000 a year or couples making $250,000. But when you scratch the surface, you learn that more than half of these folks aren't folks at all; they are small businesses. So if you work for or you own a small business, chances are this tax is for you. The rest is coming from increases in business taxes, either directly, or as cap-and-trade taxes for carbon dioxide emissions. That is a huge levee on every business that emits carbon dioxide. That includes construction, agriculture, cargo transportation, energy production, manufacturing, baking, distilling. Is that anything for the middle-class to worry about? You bet it is.

I will let you in on a little secret of government finance: Businesses do not pay business taxes. There are only three possible ways that a business tax can be paid. It is paid by us as consumers through higher prices; it is paid by us as employees through lower wages; or, it is paid by us as investors through lower earnings, that is, what is remaining of our 401(k)s. There is simply no other possible way a business tax can be paid.

The income tax deduction for charitable contributions is being curtailed for upper income taxpayers upon whom charities rely for the vast bulk of their donations every year. That means a lot less charitable contributions and a lot more demand for government services.

At just the moment when investment is desperately needed to create new jobs, the President proposed hiking the capital gains tax. That means a lot less investment and a lot less job creation.

Now, this is not a complicated principle: If you tax something, you get less of it. If you tax productivity, you get less productivity. If you tax charitable contributions, you get less charitable contributions. If you tax investments, you get less investments and less jobs. If you tax energy production, you get less energy.

So just at the time when we need more productivity, more charity, more investment for jobs, and more energy, the Obama administration proposes a massive tax increase that they have the gall to tell us will stimulate the economy. These taxes will hammer every American, either directly or indirectly. At exactly the time when we should be reducing burdens on the economy, this administration wants to increase them.

If the President wants to raise taxes because the government is out of money, what makes him think that the American people happen to be flush with cash? This is exactly the mistake that Herbert Hoover made in responding to the recession of 1929. He dramatically raised income taxes, import taxes, and spending, and he turned the recession of 1929 into the depression of the 1930s.

Adam Smith, the father of modern economics, pointed out that a government that raises taxes in response to a recession makes exactly the same mistake as a shopkeeper who raises prices in response to a sales slump. California has again ignored that warning. It is set to impose the biggest State tax increase in history on April 1. That is going to be $13 billion from California families, proportionately a little bit less than the President's taxes, but it is in the same ballpark. I suspect that by the time the Obama budget, with all of its tax increases, comes up for a vote, California will have become a poster child for what not to do. Maybe, by then, the administration and the majority in Congress will figure out that raising taxes in a recession is not exactly the smartest thing that we could be doing.

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