This November’s elections may well hinge on who can best secure the promise of a more certain economic future for American families. Amidst unprecedented foreign competition for jobs and investment, voters have the option of two vastly different approaches.
Republicans envision an America strengthened by a simpler and more pro-growth tax code. Workers must have the incentives to work, while entrepreneurs and small business owners need to see a benefit in taking risks. The best way to allay the fears of middle-class workers is to foster a climate in which quality jobs are readily created and retained.
Democrats see it differently. Barack Obama promises a host of tax increases that would surely fuel a gusher of increased government spending. The question for working families is whether the consequences are worthwhile. We need to understand that while innocuous and vague calls for “change” sound tempting, Obama’s planned tax hikes would choke job creation, redirect investment out of the country, and drain our nation’s renowned entrepreneurial spirit.
Consider Sen. Obama’s pledge to lift the cap on the Social Security payroll tax for all earners for whom all income over $102,000 is currently exempted — above $250,000. The Tax Policy Center estimates the huge new tax increase would reel in .4 percent of GDP each year.
Since employers pay half the 12.4 percent payroll-tax rate, this tax hike imposes a heavy burden on small and medium size businesses. The added costs reduce incentives for business expansion, and could be passed on by cutting wages or even firing employees. Additionally, a large percentage of small businesses file taxes as individual income. That means a tax increase ostensibly aimed at those Obama considers “rich” will strike at millions of small business owners of modest means.
It’s no wonder Hillary Clinton only months ago decried Obama’s plan as “a “trillion dollar increase” on “hard-working Americans.”
Obama’s prescription for Social Security payroll taxes is but one piece of a broader, growth-killing agenda. Instead of making the tax relief of 2001 permanent, the senator plans for it to expire. And, perhaps unaware that at least half the country owns shares of stock, Obama would lift the tax rate on capital gains from 15 to 20 percent. The threat of these tax increases leaves a cloud of uncertainty over American investors and businesses of all sizes. Capital-investment-hungry businesses, already feeling the heat from competitors in China, India, and Europe, are making decisions today based on what their tax bite will be at a later time.
Obama’s high-tax absolutism places him firmly on the left end of the ideological spectrum — and he’s not backing away. His planned increases in payroll and federal income taxes would result in a top marginal tax rate of between 55 and 61 percent, according to the Tax Foundation.
Meanwhile, Sen. McCain offers a plan that would keep America ahead of the curve in the 21st century. He would make permanent the tax relief of 2001 and 2003. His proposed cut of our extravagantly high corporate tax rate from 35 to 25 percent is good medicine for our struggling capital markets and job creation. Also refreshing are his plans for a far simpler tax code that will make it easier for families and businesses to comply.
The days when American capital and job markets faced scant resistance from abroad are long gone. Over the next few years, our country simply cannot withstand a series of debilitating tax increases. That reason alone should have conservatives as motivated as ever to stand up and fight into November.
– Congressman Eric Cantor (R.,Va.) is Republican Chief Deputy Whip in the U.S. House of Representatives.