LaTourette: Heritage Action Killed $2 Trillion Tax Hike

Sep 19, 2012

Today on MSNBC, Rep. Steve LaTourette (R-OH) credited Heritage Action and other conservative organizations with helping to kill the Simpson-Bowles inspired tax hike embedded in the Cooper-LaTourette budget plan. As one of the sponsors of the budget, he certainly didn't intend to pay Heritage Action a compliment.

However, our goal was to ensure that Americans would not be hit with another massive tax hike. So the fact that only thirty-eight representatives voted in favor of this budget plan was a definite victory for the American economy.

After the vote failed, Heritage Action's CEO Michael Needham told the New York Times, "We wanted to unify Republicans around Ryan, handle the 'Mediscare' attacks from the left, and force the conversation to be between right and left."

Reps. Steve LaTourette and Jim Cooper (D-TN) based their budget plan on the "principles outlined by the National Commission on Fiscal Responsibility and Reform, co-chaired by former Sen. Alan Simpson and Erskine Bowles." It was estimated to trim future deficits by $4 trillion over the next ten years.

At first glance, this seems like a good thing. However, this budget plan would have raised taxes by nearly $2 trillion. As Heritage's Curtis Dubay explains, "Rule #1 of tax reform: Tax reform does not raise taxes." He continues:

"Higher taxes never lower deficits, because Congress spends all the extra money it raises. True deficit reduction comes only from spending restraint, as House Budget Committee Chairman Paul Ryan showed last week. Tax reform also requires more than eliminating all exemptions, deductions, and credits with one broad stroke. Some misnamed tax expenditures-such as the mortgage interest deduction, the deduction for charitable contributions, and exemption for contributions to retirement savings accounts-are vital to maintaining a neutral tax code."

The Cooper-LaTourette budget plan would have merely given the government more rope with which to hang taxpayers. As Heritage Action explained back in March:

"The Simpson-Bowles budget continues the Washington status quo: spend as much as you want, and then raise taxes to pay for it. America does not have a tax revenue problem, we have a spending problem. Any budget that raises taxes in order to defer the necessary choices needed to rein in spending needs to be scrapped."

Simply raising taxes is not a viable solution to our country's deficit. The deficit results in part from excessive spending on the three major entitlement programs: Social Security, Medicare, and Medicaid. Heritage's Alison Fraser explains, without major reforms to these programs, a real solution does not exist. She also dissects the Bowles-Simpson recommendations, explaining the pros and cons, in terms of cuts to defense spending and cuts in non-defense discretionary spending.

Where the budget plan goes astray in a profound way is with taxes. She explains:

"As feared, the co-chairs' proposal is to levy staggering tax hikes on America's families and businesses when the problem is spending and spending alone. The simple fact, as the proposal lays out plainly, is that taxes are to increase to 20.5 percent of the economy, up from even the 19.8 percent in the President's budget after all his tax hikes are implemented and far above the 18 percent historical average."

This last part of the analysis is crucial to understanding why this budget plan would not have been good for Americans. Moving forward, it's essential for lawmakers to bear these principles in mind when they are attempting to develop a budget plan that is good for the economy as a whole, as opposed to a plan that simply tries to reduce the deficit on the backs of taxpayers. As Needham said, Bowles-Simpson only served to "muddy the message."