‘These tax hikes are precisely the wrong prescription at a time of already serious economic distress’

WASHINGTON, DC – U.S. Senate Republican Leader Mitch McConnell made the following statement on the Senate floor Monday regarding the administration’s budget that threatens the biggest tax hike in history, record spending, and massive debt:

“Americans are beginning to get a sense of what the Administration’s Budget means to them, and I think it’s fair to say that most of them are worried that it spends too much, taxes too much, and borrows too much.

“At a moment when the economy is already seriously challenged, when more people every day are struggling to make ends meet, and when the national debt is already staggeringly high, Americans were hoping for relief.

“Instead, they got a Budget that threatens the biggest tax hike in history, record spending, and massive debt. This Budget shocked a lot of people.

“Spending in this Budget is so massive that some estimate more than 250,000 new government workers will be needed to spend it all. This is consistent with the approach the Administration and the Democrat-controlled Congress have taken since the beginning of the year. In just 50 days since Inauguration Day, the Democrat-controlled Congress voted to spend $1.2 trillion … $24 billion dollars a day … $1 billion dollars an hour … most of it borrowed, in the midst of a recession.

“People across the country are understandably nervous about this kind of spending, which won’t create the jobs that are promised and which will cause further tax hikes in the future to pay for all the borrowing. But today, I’d like to focus on the tax portion of the Budget: the various tax hikes that the Administration will need to impose in an attempt to cover the Budget’s $3.6 trillion price tag.

“The Administration says 95% of Americans will not see a tax increase under this Budget plan. Well, Americans might not see an immediate increase in their income taxes. But there’s more than one way to skin a cat, and there’s more than one way for government to take money out of your pocket. I’ll mention just three that the Administration has proposed.

“First, there’s the proposed new energy tax, which would tax everyone who uses energy … which of course is 100% of the population …

“The Administration estimates that its Cap and Trade proposal would raise about $650 billion from gas and electric companies and other businesses. The first thing to note about this tax is that no one, not even Administration officials, thinks this figure is even close to the amount that will actually be raised — and no one, not even Administration officials — believes that every cent of it won’t be passed on to consumers. The President himself said during the campaign that his Cap and Trade plan would cause utility rates to “skyrocket.” More recently, OMB Director Peter Orszag publicly reaffirmed the Administration’s view that Cap and Trade would increase energy costs for everyone.

“This means that anybody who turns on a lightbulb will feel the pain. How bad will it be? Well, researchers at MIT were a little more specific than the President and Mr. Orszag. They predicted that a similar plan could cost American households up to $3,128 a year.

“Most of the utilities and manufacturers that take a direct hit from the energy tax are big businesses. But what about the small businesses, which account for nearly three fourths of all new private sector jobs? Well, there’s a tax for them too: thanks to an income tax hike on anyone earning more than $200,000 a year, many will see their taxes go up significantly. Think of a general contractor, a family restaurant, or a start-up technology firm. These are the engines of our economy. They’re struggling now. They’ll struggle even more once these tax hikes go into effect.

“Businesses with 20 or more employees get hit particularly hard. These businesses account for two-thirds of the small business workforce. The President’s budget includes a tax increase on more than half of them.

“It’s an iron rule of economics that taxes influence the decisions of those who are taxed. And businesses that have less income as a result of higher taxes are likely to do three things: cut jobs, put off buying new or better equipment, and take fewer risks. The real-world consequences of those decisions are immense: more jobs lost … less innovation … fewer new products … and lower salaries for employees, almost all of whom are probably making less than $200,000 a year.

“Hundreds of thousands of Americans are losing their jobs every month. Millions fear losing their homes. In response, the Administration has proposed in this Budget a tax hike on the nation’s biggest job creators. These businesses are shedding workers already. Higher taxes will force them to shed even more.

“I understand the Administration’s desire to make good on its promise of reforms. Most Americans understand that reforms are needed in healthcare, education, energy, and other areas. But they want the Administration to fix the crisis in the financial sector first. Until we devote our full attention to that crisis, all other recovery efforts will be in danger of coming undone. With the highest unemployment rate in 25 years, Americans simply don’t see the sense in raising taxes on small business.

“Americans from all walks of life — and both political parties — are worried about something else in the Budget. They don’t understand why charitable organizations and the people they serve should suffer in order to pay for new or expanded government programs. Yet, in an attempt to pay for all its spending proposals, the Obama Budget reduces the deduction for charitable donations.

“At a time of economic distress, when more people than ever depend on these organizations, the Administration’s Budget reduces the incentive for people to donate to them. This will affect donations everywhere from the Salvation Army to the Juvenile Diabetes Research Foundation, to educational non-profits like universities and art museums. According to one study, this proposal could lead to $9 billion less in charitable giving each year.

“The proposal on charitable giving appears to follow the European model, where people rely on the state to support cultural institutions. But non-profits across the country are mobilizing against the idea, and for good reason: people who give money to these institutions shouldn’t be penalized for it, and charities and non-profits themselves certainly shouldn’t be expected to subsidize the Administration’s policy dreams.

“These are hard times — why make them even harder?

“That’s the question a lot of people who’ve seen this Budget are asking. They’re looking at the highest tax increase ever, higher taxes on small businesses, a proposal that will divert billions of dollars away from the nation’s charities, and a light-switch tax that will touch every single American, and they see a lot more hardship. These tax hikes are precisely the wrong prescription at a time of already serious economic distress.

“This Budget plan has a number of fatal flaws. But in the midst of a financial crisis, American workers don’t need another reason to fear they’ll lose their jobs, small business owners shouldn’t be further discouraged from investing, and the nation’s charities shouldn’t have to fear even less money coming in. This Budget doesn’t just spend and borrow too much. It taxes too much.”

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