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Santorum vs. Obama: Tax Proposals


Below is a very important document put together by Henry Burke. This is about who can take on Obama and clearly Rick Santorum is the nominee to do just that.

Rick Santorum’s Made in the USA Plan Changes Everything, he is fighting for US! 

Santorum VS. Obama: Tax Proposals 

by Henry W. Burke 

EXECUTIVE SUMMARY

Rick Santorum has formulated a detailed, wise tax plan that is good for America.  Santorum proposes tax cuts that will revive and energize the economy, reduce unemployment and create jobs.

Obama’s 2013 Budget contains numerous tax increases — about $1.8 trillion in new taxes over 10 years.

The Budget is loaded with dozens of tax hikes covering a wide variety of areas. Obama wants to increase taxes on upper-income earners, raise capital gains and dividend rates, and eliminate deductions.

When you compare Obama’s tax proposals with Santorum’s, the contrast could not be any greater.  Obama’s ideas will stifle the economy; Santorum’s plan will create jobs and help the economy recover.  Twelve major differences between the two approaches are listed. 

Independent organizations rated Rick Santorum and Barack Obama when they were U.S. Senators.  The National Taxpayers Union gave Santorum a grade (GPA) of 3.66 — or an A-.  Santorum’s GPA placed him in the top 10 percent of senators, as he ranked 5th out of 50.

How did Senator Obama do in NTU’s scoring system?  Obama’s GPA was 0.00 — a rock-solid F! 

Obama’s plan is straightforward – soak the top-earning households in America – those earning more than $200,000 as single filers or $250,000 as married couples. Roughly two thirds of small businesses are taxed at this rate.    This means Obama wants to tax the very people who create most of the new jobs.

Raising taxes during a recession has never been viewed as a sensible policy.  The economy is stuck in neutral, and we need to put it in gear.  A tax increase at this time would have a very chilling effect on the economy.

Obama seems intent on pushing class warfare.  Clearly, this will be a major theme in his reelection campaign.   

Top earners are already paying more than their “fair share” of taxes.  

The top 1% of income earners paid 38% of all federal income taxes in 2008; and the top 10% of earners paid 70% of the total taxes.  

Taxpayers who had incomes over $200,000 earned 32% of the total income and paid 52% of the total income taxes. 

It is estimated that 47% to 50% of Americans pay no tax at all!

There are numerous lessons we can learn from the Reagan Recovery.  The weak economy Reagan inherited led to a deep recession.  Instead of using a Keynesian Stimulus, he instituted lower tax rates and reduced government regulation.

The result was a dramatic improvement in the economy, more jobs and lower unemployment.

An added bonus came in the form of more tax revenue.  Democrats would lead you to believe that lower tax rates mean lower tax revenue for the federal government. The opposite is true.

Under the Reagan Plan of lower tax rates, tax revenues increased by a whopping 54%! 

Finally, the recently enacted payroll tax holiday extension is discussed.

Strong evidence exists that the payroll tax cut extension and the unemployment coverage extension will not help our economy. The measure will add to the deficit and do nothing for our recovery. 

INTRODUCTION 

How do Barack Obama’s tax proposals compare with Rick Santorum’s tax plan? The contrast could not be greater.  Obama’s 2013 Budget includes dozens of tax increases that total $1.8 trillion over 10 years.

Obama wants to increase taxes on higher-income earners in various ways.  He would raise the marginal tax rates, eliminate deductions, and raise capital gains and dividends rates.  High income people would actually experience a doubling of their taxes when dividends are taxed as ordinary income. If enacted, these proposals would eliminate any chance for economic recovery.

By contrast, Santorum would cut taxes for many taxpayers, thereby energizing the economy.  When President Reagan made across-the-board tax cuts in the 1980s, the economy took off and tax revenues swelled.  The same thing will happen with Santorum’s tax initiatives.

Presidential candidate Rick Santorum has a totally different vision for America than Obama.  He sees an America where entrepreneurs can expand their businesses and hire more workers.  They can only do this if our tax code encourages people to be successful.

I will compare Barack Obama’ proposals on taxes with Rick Santorum’s plan by exploring the following topics:

A.  Rick Santorum’s Tax Plan

B.  Obama’s Tax Increase Proposals

C.  Comparing Obama’s and Santorum’s Tax Proposals

D.  Independent Ratings of Obama and Santorum

E.  Obama Soaks the Job Creators

F.  Obama’s Class Warfare Theme

G.  Who Pays the Taxes?

H.  Lessons from the Reagan Recovery

I.  Payroll Tax Cut Extension Measure

A.  Rick Santorum’s Tax Plan  

The Rick Santorum website provides the following information on Taxes 

_______________________________________________________

 Rick Santorum — Defender of the Taxpayer 

Rick Santorum believes that to have a strong economy, we must have strong families – because the family is the first economy.  Our government must recognize this and create an environment for our families, our small businesses, and our communities to thrive.  Senator Santorum believes we are a land of opportunity where all Americans have the chance to rise on their own merits and hard work.  Sadly, President Obama has done just the opposite by using class warfare to divide America and limit opportunity for all. 

Rick Santorum is committed to reviving our economy, restoring economic growth, and creating jobs in America again by unleashing innovation and entrepreneurship through lower and simpler taxes for American businesses, workers, and families.  He also will roll back job killing regulations, restrain our spending by living within our means, and unleash our domestic manufacturing and energy potential.  His vision for America is to restore America’s greatness through promotion of freedom and opportunity for all.  This is just the start. A plan made in America to promote America’s families and prosper its businesses.

The Santorum Solution 

1.   Cut and simplify personal income taxes by cutting the number of tax rates to just two — 10% and 28% and return to Reagan era pro-growth tax rate;

2.   Simplify the tax code and reduce middle income taxes by eliminating the Alternative Minimum Tax (AMT);

3.   Simplify the tax code, encourage savings and investment, and reduce taxes by eliminating the Death Tax;

4.   Lower the Capital Gains and Dividend tax rates to 12% to spur economic growth and investment;

5.   Reduce taxes for families by tripling the personal deduction for each child;

6.   Reduce and simplify taxes for families by eliminating marriage tax penalties throughout the federal tax code;

7.   Retain deductions for charitable giving, home mortgage interest, healthcare, retirement savings, and children;

8.   Eliminate the cap on deductions for losses incurred in the sale of a principal residence;

9.   Cut the corporate income tax rate in half to make our businesses competitive around the world, from 35% to 17.5%;

10. Eliminate the corporate income tax for manufacturers to spur middle income job creation in the United States and benefit from the job multiplier effect in manufacturing;

11.  Increase the Research and Development Tax Credit from 14% to 20% and make it permanent to spur on innovation in America;

12. Eliminate the tax on repatriated taxable corporate income invested for manufacturers equipment investment, 5.25% corporate tax rate on other repatriated income invested in the USA, and 100% expensing for new business equipment.

During his time in public office, Senator Santorum was a strong advocate for a family and small business-friendly tax code, serving as the point man to pass the Bush tax cuts of 2001 and 2003 that revitalized our economy after the terrorist attacks of 9/11.  For his work on reducing the tax burden on all Americans, Senator Santorum has received praise from groups ranging from the Club for Growth to Americans for Tax Reform and the National Federation of Independent Businesses.

__________________________________________________________ 

B.  Obama’s Tax Increase Proposals 

Obama released his budget for Fiscal Year 2013 on February 13, 2012.  As expected, his 2013 Budget contains numerous tax increases — about $1.8 trillion in new taxes over 10 years.  The $1.8 trillion is the net total after subtracting a token $88 billion in tax cuts; even those tax cuts are marginal because most of them are for his pet “green activities.”

Some of the tax hikes in Obama’s 2013 Budget include: 

1.     A multitude of tax increases that total $1.8 trillion over 10 years.

2.     Raising taxes on families making more than $250,000.  Under his proposal, the top two marginal tax rates would go from 33% to 36% and from 35% to 39.6%.

3.     Raising the capital gains tax rate from 15% to 20%.

4.     Taxing dividends at the same rate as ordinary income.  For the top wage-earners, this would be an increase from 15% to 39.6%.  When you include the Obamacare 3.8% surcharge, the dividend rate rises to 43.4%.  [39.6% + 3.8% = 43.4%]

5.     Numerous recycled tax increases from earlier proposals.  These include repeal of the Bush-era Tax Cuts, higher death taxes and limited deductions for upper-income families.

6.     In his tax reform outline, Obama hints at eliminating deductions for families earning more than $1 million a year.

7.     The much-touted Buffet tax.  It is very vague but apparently the Buffett rule would impose a minimum tax rate of 30% on incomes exceeding $1 million.

The dividend tax is really a double tax because corporate income where dividends arise is already taxed 35 % at the business level. The effective rate on dividends would stand at more than 63 % if Obama’s misguided policy became law. This would significantly curtail investment and slow economic growth.

Obama also hints at eliminating deductions for families earning more than $1 million a year. Such a policy would eliminate their deductions for mortgage interest, saving for retirement, and health care expenses. 

The average revenue collected by the federal government since World War II is around 18 percent of GDP.  Obama’s Budget would push taxes past this upper limit by 2014.  At the end of 10 years, his budget would place revenue at 20.1% of GDP.  Americans will only tolerate the government taking a certain amount from them and Obama ignores this important point.

Obama’s 2013 Budget will likely receive the same warm reception that he saw with his 2012 Budget.  Rather than tackling spending, that budget contained over 43 tax hikes.  In May, 2011, the U.S Senate soundly rejected Obama’s 2012 Budget by a vote of 97 to 0!  When you consider that Democrats control the Senate, this vote is especially humiliating! 

Obama and Democrat Senate Majority Leader Harry Reid have gone three years without an approved federal budget.  In fact, January 24, 2012 marked the 1000th day since the U.S. senate passed a budget.  

This is a profound dereliction of duty.  To keep the government running, Congress has had to resort to numerous Continuing Resolutions.  These short-term measures inject uncertainty into a troubled economy and hinder an economic recovery.  Also we have had huge deficits (over $1.3 trillion per year) that add to the National Debt.

C.  Comparing Obama’s and Santorum’s Tax Proposals 

How do Barack Obama’s tax proposals compare with Rick Santorum’s tax plan?  The contrast could not be much greater.  The differences include:

1.     Obama’s 2013 Budget includes a multitude of tax increases that total $1.8 trillion over 10 years.  Santorum proposes numerous tax cuts to spur the struggling economy.

2.     Obama proposes raising taxes on families making more than $250,000 by increasing the top two marginal tax rates to 36% and 39.6%.  Santorum wouldlower the income taxes for upper-income families by reducing the top rate to 28%.

3.     Obama proposes raising income tax rates on families.  Santorum wouldlower taxes on families by tripling the personal deduction for each child and eliminating the marriage tax penalties.

4.     Obama allows the Alternative Minimum Tax (AMT) to impact more middle-income taxpayers.  Santorum eliminates this stealth tax.

5.     Obama modifies the tax code to raise taxes.  Santorum simplifies the tax code and encourages investment by eliminating the Death Tax.

6.     Obama wants to raise the capital gains tax rate from 15% to 20%.  Santorum would lower the capital gains rate from 15% to 12%.

7.     Obama proposes taxing dividends as ordinary income for the top income-earners, thereby increasing the tax rate from 15% to 39.6%.  Santorum wouldcut the dividend tax rate from 15% to 12%.

8.     Obama cannot wait to end the Bush-era tax cuts.  Rick Santorum served as the point man in the Senate to pass the Bush tax cuts.

9.     Obama hints at eliminating deductions for families earning more than $1 million a year.  Santorum increases deductions for families and eliminates the cap on deductions for losses incurred in the sale of a principal residence.

10.       Obama continually engages in class warfare and talks about instituting the Buffett tax on upper-income earners.  Presumably, Obama would impose a minimum tax rate of 30% on incomes exceeding $1 million.  Santorum know that you stifle the economy by increasing taxes on the job creators.

11.        Obama views businesses as a target for greater taxation.  Santorum would institute a number of business-friendly tax measures.  These include cutting the corporate income tax rate in half (from 35% to 17.5%), eliminating the corporate income tax for manufacturers, and increasing the Research and Development Tax Credit from 14% to 20%.

12.   bama wants to impose over $1 trillion in job-killing tax hikes on a struggling economy.  Santorum proposes tax cuts that will revive and energize the economy.

D.  Independent Ratings of Obama and Santorum 

How do independent organizations rate Rick Santorum and Barack Obama?  One such organization is the National Taxpayers Union (NTU), an organization that has been rating members of Congress for 20 years.

NTU rated Rick Santorum and Barack Obama when they were U.S. Senators.  

NTU is an independent, non-partisan organization that  “mobilizes elected officials and the general public on behalf of tax relief and reform, lower and less wasteful spending, individual liberty, and free enterprise.”

Jeffrey H. Anderson and Andy Wickersham published an informative article in The Weekly Standard on 2.15.12, entitled “Was Santorum a Senate Spendthrift?”


The following are excerpts from this article:

For each session of Congress, NTU scores each member on an A-to-F scale.  NTU weights members’ votes based on those votes’ perceived effect on both the immediate and future size of the federal budget.

Those who get A’s are among “the strongest supporters of responsible tax and spending policies”; they receive NTU’s “Taxpayers’ Friend Award.”  B’s are “good” scores, C’s are “minimally acceptable” scores, D’s are “poor” scores, and F’s earn their recipients membership in the “Big Spender” category.  There is no grade inflation whatsoever, as we shall see.

1.  Rating for Senator Rick Santorum

NTU’s scoring paints a radically different picture of Santorum’s 12-year tenure in the Senate (1995 through 2006) than one would glean from the rhetoric of the Romney campaign.

Fifty senators served throughout Santorum’s two terms:  25 Republicans, 24 Democrats, and 1 Republican/Independent.  On a 4-point scale (awarding 4 for an A, 3.3 for a B+, 3 for a B, 2.7 for a B-, etc.), those 50 senators’ collective grade point average (GPA) across the 12 years was 1.69 — which amounts to a C-. 

Meanwhile, Santorum’s GPA was 3.66 — or an A-.  Santorum’s GPA placed him in the top 10 percent of senators, as he ranked 5th out of 50.

Across the 12 years in question, only 6 of the 50 senators got A’s in more than half the years.  Santorum was one of them.

He was also one of only 7 senators who never got less than a B.

…Santorum was the only senator who got A’s in every year of Bush’s first term.  None of the other 49 senators could match Santorum’s 4.0 GPA over that span.

2.  Rating for Senator Barack Obama

As for Santorum’s potential opponent in the fall, Barack Obama’s three years in the Senate (2005 through 2007) overlapped only with Santorum’s final two years.

(In 2008, Obama effectively left the Senate to campaign for President and therefore didn’t cast enough votes for NTU to score him that year.)

In both of the years that the two men overlapped (2005 and 2006), as well as throughout Obama’s three years’ worth of preparation for the presidency, Obama’s GPA was 0.00 — a rock-solid F. 

Now that’s acting like a Democrat — something Santorum has never done.

E.  Obama Soaks the Job Creators

Obama’s plan is straightforward – soak the top-earning households in America – those earning more than $200,000 as single filers or $250,000 as married couples.  According to the IRS data, that “tiny, wealthy minority” encompasses more than 4.3 million households!  When you count spouses, children, and other dependents, you are talking about 12.5 million Americans!

Also many of the small businesses fall into this $200,000 – $250,000 category. Roughly two thirds of small businesses are taxed at this rate.  We know that small businesses create the majority of jobs in America, yet they are being targeted for tax increases.

Small business owners may fall into this $200,000 to $250,000 category, but they are far from “rich.”  Quite often, they are hard-working entrepreneurs who work 60 hours or more per week to run their businesses and provide for their families and employees.  It is our overly complicated Tax Code that places them in the “rich” category.

Raising taxes during a recession has never been viewed as a sensible policy.  The economy is stuck in neutral, and we need to put it in gear.  A tax increase at this time would have a very chilling effect on the economy.

Tax relief across the full breadth of income levels is the needed approach; and along with that, our country must cut the spending. 

F.  Obama’s Class Warfare Theme  

Obama seems intent on pushing class warfare in his speeches and writings.  This is nothing new; think back about four years ago during the 2008 presidential campaign, when candidate Barack Obama had a chance encounter with “Joe the Plumber.”  In response to Joe Wurzelbacher’s question, Obama gave an accidental glimpse of his ideology by saying “I think when you spread the wealth around, it’s good for everybody.” 

Under Obama’s watch, our economy has been stagnant with consistently high unemployment for three years.  His $800 billion Stimulus program failed miserably without helping the recovery.  He has racked up huge deficits each year and has added $4.6 trillion to the National Debt. 

Obama knows he cannot run for reelection based on his record.  Accordingly, he is attempting to divert the voters’ attention away from the economy by igniting class warfare (envy for someone who makes more money than you).  Standard wording in his speeches includes the phrases “everybody should get a fair shot, everybody should do their fair share.”

Obama wants to “spread the wealth around” by dramatically increasing taxes on “the rich.”  He uses his federal budgets to convey his income redistribution ideas (tax increases) to Congress.  Because his ideas are so out of touch, he has gone three years without an approved budget.  The 2012 Budget that he submitted to Congress last year was soundly defeated by a 97 to 0 vote!  His recently released2013 Budget, which includes numerous recycled tax hikes, will have a similar fate.  Many politicians are declaring it “Dead on Arrival.

Why would Obama submit a budget that Congress will not accept?  The answer is pure politics.  By stirring up class warfare animosity, he thinks voters will swing in his direction.  It is all about getting reelected. 

The 2013 Budget includes this message from Obama:

We built this Budget around the idea that our country has always done best when everyone gets a fair shot, everyone does their fair share, and everyone plays by the same rules.

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/message.pdf  

G.  Who Pays the Taxes?  

The highest-earning families and businesses already pay the lion’s share of the federal income tax burden.  A September 20, 2011 IRS publication provides some basic facts on income tax rates and tax shares.  The report reveals that the top 1% of income earners paid 38% of all federal income taxes in 2008; and the top 10% of earners paid 70% of the total taxes.

 Taxpayers who had incomes over $200,000 earned 32% of the total income and paid 52% of the total income taxes. 

http://www.irs.gov/pub/irs-soi/11intr08winbul.pdf

Taxpayers filed 142.5 million Tax Returns in 2008.  Out of those, 90.7 million returns (63.6%) were classified as taxable returns.  (A taxable return is a return that has a total income tax greater than $0.)  The 63.6% is the lowest percentage in over 23 years.  This means that 36% of the tax filers paid no tax.  [100.0% - 63.6% = 36.4%]

Of course, many people do not even file an income tax return.  The IRS Form 1040 states you are not required to file a tax return for 2011 if your income was under $9,500 (single), or under $19,000 (married filing jointly).  People who receive the Earned Income Credit or Additional Child Tax Credit must file.  It is estimated that 47% to 50% of Americans pay no tax at all! 

The Total Individual Income Tax for 2008 was $1.032 trillion; the Average Tax Rate for taxable returns was 13.6%. 

1.  Summary by Percentile Group  

The information from this IRS publication is summarized in the following table:

Individual Income Taxes and Shares

(2008 IRS Tax Returns)

 

Income

Percentile

Group

Adjusted Gross Income

(AGI) Floor

Percent of

Total AGI

Percent of

Total Tax

  Top 0.1%      $1,803,585          10.0%           18.5%
  Top 1%         $380,354          20.0%           38.0%
  Top 5%         $159,619           34.7%           58.7%
  Top 10%         $113,799           45.8%           69.9%
  Top 25%           $67,280           67.4%           86.3%
  Top 50%           $33,048           87.2%           97.3%
  Bottom 50%                –           12.8%            2.7%

 

Source:  U.S. Department of Treasury, Internal Revenue Service, Individual Income Tax Rates and Shares, 2008, (September 20, 2011).

http://www.irs.gov/pub/irs-soi/11intr08winbul.pdf

The IRS report determined the following about who pays the taxes:

  1.     The top 0.1 percentile of income earners (those with an Adjusted Gross Income over $1.8 million) earned 10% of the total income and paid 18% of the total taxes.

2.     The top 1 percentile of income earners (those with an AGI over $380,000) earned 20% of the total income and paid 38% of the total taxes.

3.     The top 5 percentile of earners (those who earned over $160,000) earned 35% of the total income and paid 59% of the total taxes.

4.     The top 10 percentile of income earners (those with income over $114,000) earned 46% of the total income and paid 70% of the total taxes.

5.     The top 25 percentile of earners (those who earned over $67,000) earned 67% of the total income and paid 86% of the total taxes.

6.     The top 50 percentile of earners (those who earned over $33,000) earned 87% of the total income and paid 97% of the total taxes.

7.     The bottom 50 percentile earned 13% of the total income and paid less than 3% of the total taxes.

2.  Summary for Higher-Income Earners  

I summarized the information from the IRS report for higher-income earners (taxpayers with incomes over $200,000) in the following table:

Individual Income Tax for Higher-Income Earners

(AGI over $200,000)

(2008 IRS Tax Returns)

 

Income Group

No.

of

Taxable

Returns

(Thousands)

Adjusted

Gross

Income

(AGI)

($Billions)

AGI –

Percent

of

Total

Income

Total

Income

Tax

($Billions)

Average

Tax

Rate

Percent

of

Total

Tax

$200,000 to $500,000     3,460     $988.6   13.0    $193.7  19.6%  18.8%
$500,000 to$1,000,000        574     $390.2     5.1      $93.9  24.1%    9.1%
$1,000,000 ormore        319  $1,068.3   14.1    $249.0  23.3%  24.1%
Total for $200,000 to$1 Million Plus     4,353  $2,447.1   32.2    $536.6  21.9%  52.0%
Total for AllTaxable Returns   90,660  $7,583.5 100.0 $1,031.6  13.6% 100.0%

 

Source:  U.S. Department of Treasury, Internal Revenue Service, Individual Income Tax Rates and Shares, 2008, (September 20, 2011).

http://www.irs.gov/pub/irs-soi/11intr08winbul.pdf    

The following statements can be said about Higher-Income Earners:  

1.     Taxpayers 200K to 500K (AGI from $200,000 to $500,000) earned 13% of the total income and paid 19% of the total income taxes.

2.     Taxpayers 500K to $1 million (AGI from $500,000 to $1 million) earned 5% of the total income and paid 9% of the total taxes.

3.     Taxpayers over $1 million (AGI over $1 million) earned 14% of the total income and paid 24% of the total taxes.

4.     The higher-income group — Taxpayers from 200K to over $1 million (AGI over $200,000) earned 32% of the total income and paid 52% of the total income taxes.

5.     The Average Tax Rate for this group was 21.9%.

 

3.  Summary for All Tax Returns  

Statements about Total for All Taxable Income Tax Returns in 2008 are:  

1.     About 90,660,000 taxable Tax Returns were filed in 2008 (where Income Tax was over $0).

2.     The Total Adjusted Gross Income (AGI) for these Tax Returns was $7,583.5 billion ($7.584 trillion).

3.     The Total Income Tax for all Tax Returns was $1,031.6 billion ($1.032 trillion).

4.     The Average Tax Rate for all of the taxable Tax Returns was 13.6%.

 

4.  General Comments about Taxes  

Some people might wonder why I would devote so much space to this subject.  First, it helps when people have the facts about who pays the taxes.  You can see that higher-income taxpayers are already paying a very high percentage of the total taxes.

Also many of the small businesses fall into this $200,000 – $250,000 category. Roughly two thirds of small businesses are taxed at this rate.

Obama wants to dramatically increase taxes on the “rich.”  What if the federal government confiscated 100% of the gross income from the taxpayers who made over $1 million?  That would amount to $1.068 trillion (2008 study).  This amount is less than the federal deficit for one year!  (Deficits have been running over $1.3 trillion per year under Obama.)

Obviously, this is ridiculous and far-fetched, but it makes a point.  People would not stand for it; they would have no incentive to earn money; and they would leave the country in droves!  However, it helps to put the government’s spending and deficits into perspective.

I might also point out that the Total AGI for all taxpayers ($7.58 trillion) is about half of our $15.2 trillion National Debt. 

Of course, all of the above figures dealt with Individual Income Taxes.  The federal government receives revenue (taxes) from various sources.  According to the Congressional Budget Office (CBO), the Actual Revenue and Outlays for 2011 were:

CBO’s Baseline Budget for Fiscal Year 2011

 

Description Actual FY 2011Amount($ Billions)
Revenue
  Individual Income Taxes     $1,091
  Social Insurance Taxes        $819
  Corporate Income Taxes        $181
  Other        $211
    Total Revenue     $2,302
Outlays – Total     $3,598
Deficit     $1,296

 

Source:  CBO, The Budget and Economic Outlook: Fiscal Years 2012 to 2022, January 31, 2012.

http://www.cbo.gov/publication/42905

The federal government took in $2.3 trillion and spent $3.6 trillion in FY 2011.  When you spend $1.3 trillion more than you take in, that produces a $1.3 trillion deficit. 

 

H.  Lessons from the Reagan Recovery

Ronald Reagan served as the 39th President of the United States from 1981 – 1989.  Reagan inherited a terrible economy from Jimmy Carter with double-digit inflation rates, high unemployment and heavy deficit spending.  For example, the prime interest rate was 21-1/2 percent!  The country plunged into a deep recession in July 1981 that lasted 16 months and ended in November 1982.

In 1981, President Reagan formulated a plan to revitalize the economy.  His plan included:

1.     Reduce tax rates across the board

2.     Decrease unnecessary regulations

3.     Work with the Federal Reserve to maintain a stable monetary policy

4.     Slow the growth of federal spending

In August 1981, President Reagan signed into law the Economic Recovery Tax Act (ERTA, also known as the Kemp-Roth Tax Cut). The ERTA slashed marginal earned income tax rates by 25 percent across the board over a three-year period.

The Reagan tax cut plan also included a reduction in the capital gains tax rate from 28% to 20%.  Following the 1981 cut in the capital gains rate, capital gains revenues leapt from $12.5 billion in 1980 to $18.7 billion by 1983; this was a huge 50 % increase!

Reducing income and capital gains tax rates in 1981 helped to launch what we now appreciate as the greatest and longest period of wealth creation in world history. In 1981, the stock market bottomed out at about 1,000 (Dow Jones Industrial Average), compared to nearly 13,000 today.

What about tax rates?  Obama likes to push class warfare and he harps on “tax breaks for the rich.”  Lower tax rates do not mean less tax revenue!  Let’s examine the Reagan years.

Thanks to “bracket creep,” the double-digit inflation of the 1970s pushed millions of Americans into higher tax brackets.  To help offset this tax increase and improve incentives to work, President Reagan proposed sweeping tax reductions.

What happened?  Total tax revenues climbed by 99.4% during the 1980s.  After the economy received an unambiguous tax cut in January 1983, personal income tax revenues climbed by more than 54% by 1989.

http://www.heritage.org/research/reports/2003/08/the-historical-lessons-of-lower-tax-rates

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One Response to “Santorum vs. Obama: Tax Proposals”

  1. Joanne Johnson Says:

    PICK RICK!

    JUST COMPARE RICK AND OBAMA’S CPA = ANSWER!

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