by Congressman Steve Austria
As we wrap up the official business of the 112th Congress, there are still important issues that must be completed before the end of the year. The term “fiscal cliff” is often used in Washington to describe the consequences of government policies set to go into effect in January, including numerous tax increases and dramatic spending cuts that place a disproportional burden on our national defense budget. At the same time the US government is also expected to hit its debt ceiling due to continued borrowing for out of control spending. Most economists agree that failure by the President and Congress to address the looming ‘fiscal cliff”; a combination of massive tax hikes that result from the expiration of the “Bush tax cuts”, ending of the temporary payroll tax cuts which would increase taxes for workers and the beginning of new taxes included in President Obama’s health care law, in addition to “sequestration” which includes massive funding cuts towards our national defense and other government programs, could result in our nation slipping back into a recession.
Most Americans seem skeptical as to whether or not our elected officials in Washington can actually work together to avoid such a crisis. With a Republican controlled Congress set on not raising taxes, protecting critical funding for our national defense while cutting other government spending; they must work side-by-side with a Democratic Senate and President who are set on increasing revenue by raising taxes on those earning more than $200,000 (single) or more than $250,000 (married) many who are small business owners while at the same time making cuts to our national defense in order to pay for other government spending programs. As Americans watch closely, Republicans and Democrats in Washington must find a way to work together to find an answer that will rescue America from the imminent “fiscal cliff.”
A recent report from the accounting firm of Ernst & Young projects the imminent tax hike on small and family-owned businesses being proposed by this administration, would lead to the loss of up to 700,000 jobs in America. Secretary of Defense Leon Panetta has already called the looming national security cuts “devastating” and said sequestration …”would have a devastating effect on not only national defense but I think on the rest of the country.”
During a time of uncertainty with a struggling economy, our nation cannot afford Washington gridlock resulting in an even more unstable economic environment. The House of Representatives has already passed several measures which would avoid a tax hike in its entirety and avert cuts to our military – by reforming the tax code and finding common-sense spending cuts elsewhere. The House passed a budget again this year to cut and cap out of control spending, passed three additional bills earlier this year to avoid disproportionate cuts to our military caused by sequestration in which I helped co-sponsor, and passed a bill to extend all of the tax cuts already in place for another year, helping to bring more certainty to our small businesses and families and preventing a massive tax increase on January 1st. Unfortunately, we have yet to see any action by the Senate on these bills. We have not seen a budget pass the Senate in nearly three years and not one single Republican or Democrat in either the House or Senate voted for the President’s budget.
The President is demanding approximately $1.6 trillion in revenue through tax increases. According to his proposal, $835 billion of this new revenue will come from allowing the top two tax rates to increase. The rest of the revenue would be derived from other taxes such as increasing the death tax and the gift tax and capping total deductions at 28%. This administration has also suggested that once we have the tax increases we can then find cuts of $400 billion down the road.
Serious challenges require serious sacrifices, and our debt crisis is no different. Spending cuts and fiscal responsibility must happen now. The House Majority leadership has agreed to additional revenue as part of the “balanced approach”, but increases revenue not through higher taxation but through fundamental tax reform that lowers rates and closes special interest loopholes. As is often said about Washington, “We don’t have a revenue problem, we have a spending problem.”
The math seems pretty simple: higher taxes on small and family-owned businesses will mean fewer jobs for Americans. Republicans have come to the table, presented a plan on cutting government spending and balancing the budget, and have shown faith in the greater good of a balanced solution. For the process to work, Democrats must now come forward with their own plan. The American people expect their elected officials to work together and across the branches of government for the good of the country, especially at a time when so much is at stake. That time is now.