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The Right and Wrong Approach to Tax Policy

The opinions expressed by columnists are their own and do not necessarily represent the views of

“I personally don’t believe we ought to be raising taxes”

“You don’t raise taxes in a recession, which is why we haven’t and why we’ve instead cut taxes. So I guess what I’d say is … you don’t raise taxes in a recession. ”

“The real risk to this economy is on the side of slow down…and that means we’ve got to make sure that we don’t take gasoline out of the tank at the end of this year.”

If you thought these quotes regarding the extension of the current tax rates were from a Republican, I wouldn’t blame you. But in reality, they’re from former President Bill Clinton, President Barack Obama, and former economic adviser to the Obama Administration, Larry Summers.

The debate centers around what to do with the 2001 and 2003 tax rates, first passed under President George W. Bush, and fully extended in 2010, for two years, by President Obama with the support of 91 sitting House Democrats and 39 Democratic Senators.

The uncertainty over these tax rates, which expire at the end of the year, has paralyzed small businesses, private investment and slammed the brakes on private-sector job creation.

President Obama announced he supports tax increases on everyone who makes $250,000 and up. He advocates increasing taxes to the same levels they were under former President Clinton, a position even Clinton himself doesn’t support.

President Obama claims his tax hike only affects 3 percent of Americans. But according to the nonpartisan Joint Committee on Taxation, that translates into nearly 1 million of the most profitable small businesses across the country who are in a position to grow and hire. The President’s tax increases would hit over 50% of all the income generated by small businesses. The Small Business Administration (SBA) states that small firms accounted for 65 percent, or 9.8 million, of the 15 million net new jobs created between 1993 and 2009 – this is 7 out of 10 new jobs created. Yet, this tax increase is focused on precisely the same group of individuals most likely and capable of hiring new workers.

With 41 months of unemployment at or above 8 percent, this is not a wise course of action.

I believe there is better approach. This week the House will vote to extend all the current rates for one year to provide certainty for individuals and small businesses. During that year, the House Ways and Means Committee, on which I serve, can continue to move forward with comprehensive tax reform which will simplify our tax code for both employers and individuals, leaving us with lower tax rates for both and setting the stage for private sector economic growth to flourish.

These reforms include a top corporate tax rate of 25% and eliminating the six rate categories for personal income and replacing them with two: 10% and 25% for individuals. By doing so, we can throw out the 70,000 pages of tax code, no longer have the highest business tax rate in the world, and lower the individual rates; making the tax code fairer, simpler, and reducing the yearly tax obligations for everyone. By eliminating loop holes and special deductions, we ensure every American pays their fare share of taxes for living in the greatest country on Earth.

The tax code was last reformed in 1986, under the leadership of President Reagan and the stewardship of the Democratic Speaker Tip O’Neil. Despite the reality of a divided government, what followed was a sustained period of economic prosperity that benefited all Americans. Nearly 30 years later, we find the same divided government and the same stagnated economy. We should aim that high again and put our economy on the path to prosperity.

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