Study: Kerry's Fiscal Agenda "Makeover" Won't Improve Budget Picture for Taxpayers (NTU.org)

For Immediate Release Jul 12, 2004 For Further Information, Contact: Peter J. Sepp, Annie Patnaude, Drew Johnson, (703) 683-5700

Study: Kerry's Fiscal Agenda "Makeover" Won't Improve Budget Picture for Taxpayers

(Alexandria, VA) -- For overtaxed and deficit-weary Americans, future prospects for lower federal spending are bleak indeed, according to a detailed analysis of the Democratic Presidential candidate John Kerry's fiscal agenda by the non-partisan National Taxpayers Union Foundation (NTUF). Despite adding spending caps to his agenda, Kerry's campaign promises could still hit taxpayers with a $226 billion blow, on top of the 29 percent spending run-up under George W. Bush's term.

"Despite Kerry's attempts to outflank Bush on the deficit issue and portray himself as the more fiscally responsible candidate, the data behind Kerry's rhetoric tell a different story," said NTUF Policy Analyst and study author Drew Johnson. "Enactment of Kerry's 'revised' spending agenda in its entirety would still mean higher taxes, a larger national debt, or likely both."

The NTUF study systematically examined the fiscal policy implications of Kerry's agenda, using campaign and third-party sources (like the Congressional Budget Office) to assign a cost to each budget proposal he offered. For actual legislation that Kerry has endorsed, the study also relies on NTUF's BillTally project, a computerized accounting system that has, since 1991, tabulated the cost or savings of every piece of legislation introduced in Congress with a net annual impact of $1 million or more. Highlights of the study include:

Based on Kerry's promise to "pay for" every program he has proposed, U.S. taxpayers would each face an average additional $2,206 in higher taxes during Kerry's first year in office, and a cumulative increased tax burden of $6,066 over his first term.

If Sen. Kerry's policy agenda were enacted in full, annual federal spending would rise by at least $226.125 billion during the first year of a Kerry Presidency alone.

Despite nearly $36 billion in spending cuts, $734.62 billion of Kerry's spending agenda remains unaccounted for, and presumably passed on to American taxpayers in the form of increased taxes or suffocating debt.

Kerry has promised nearly $115 billion in social welfare, foreign aid, energy, and environmental handouts during his first term, including $2 million to restore voting rights to felons.

Although Sen. Kerry claims Americans can look to his voting record when determining whether to trust his vow of fiscal responsibility, according to NTUF's BillTally and VoteTally reports, Kerry sponsored or cosponsored $182 billion worth of new federal legislation in 2003, and voted to increase federal spending by $466.5 billion during 2002. VoteTally figures for 2003 are unavailable due to Sen. Kerry's many absences.

Kerry has announced only five cost-saving policy ideas out of a total of 70 policy proposals.

"By exempting a series of major discretionary categories, Kerry's so-called 'strong' spending caps are actually so porous as to be no more effective than the restraints George W. Bush has sought," Johnson concluded. "In the final analysis, the 'winner' of the 2004 election could very well be the federal deficit -- leaving taxpayers with a landslide loss of their economic freedom."

NTUF is the research and educational arm of the National Taxpayers Union, a non-profit citizen group founded in 1969. Note: NTUF Policy Paper 153, One Hand In Your Pocket: How Kerry's Campaign Pledges Stand to Cost Taxpayers Billions, is available online at www.ntu.org.

NOTE this study was done BEFORE his purposed $30 billion coporate welfare energy plan.

http://www.ntu.org/main/press.php?PressID=630&org_name=NTU

Kerry's Tax Plan: Too Much Tinkering by Peter J. Sepp

In offering a plan purporting to "create 10 million jobs," John Kerry has become the latest officeseeker to embrace the fanciful notion that mere tinkering with the Tax Code can outsmart the free market. History proves otherwise.

The three biggest economic expansions of the 20th Century, under Presidents Coolidge, Kennedy, and Reagan, were accompanied by straightforward reductions in federal tax rates. Unfortunately, Kerry's modest nod in this direction (a cut in the corporate tax rate of 1.75 percentage points) would be followed by a harsh slap -- new tax penalties on businesses that, in his words, "take jobs overseas."

Supporters of Kerry were buoyed by a General Accounting Office report supposedly showing that a majority of U.S. (and even more foreign-controlled) corporations reported no income tax liability between 1996 and 2000. But there may be less here than meets the eye. Many of these businesses were offsetting their liabilities with provisions that Congress itself enacted, such as employee benefit expense deductions. The effective overall corporate tax rate in the U.S. is higher than any other industrialized nation's except Japan's. Lawmakers may decry corporations relocating overseas, but Washington's reckless tax policies are helping to push businesses away from our shores.

Moreover, despite public concern over the "outsourcing" of white-collar jobs, a recent Wall Street Journal investigation discovered that foreign firms send more office work here than our companies send overseas -- contributing to a net value for the American economy of $54 billion. During the 1990s, three-fourths of U.S. manufacturing growth came from industries most open to worldwide trade and exports. Retaliating against foreign firms, or American companies with foreign ties, could negatively impact employment in this sector.

Kerry's other proposal, a tax credit for businesses that create jobs, is equally problematic. As former Treasury official Bruce Bartlett notes, the overall employment picture is made up of millions of lost and created jobs in the space of a single month, a dynamic process that a tax credit can't easily impact. In 1994, the Labor Department found that a Clinton-era jobs credit "did not induce employers to hire members of target groups they might not otherwise have offered jobs."

One irony of Kerry's jobs plan is that Kerry himself would further undermine its already minimal potential, by proposing to raise taxes on households in America making over $200,000. In his fairy-tale world, this income bracket is populated by robber barons and madcap heiresses, but statistics tell a different story. According to Congress's own Joint Economic Committee, over two-thirds of all personal income tax returns in the top bracket (which is actually higher than Kerry's proposed income threshold) report at least some earnings from a sole proprietorship, partnership, or "S" corporation.

Kerry supporters counter that most full-time small businesses report incomes much lower than $200,000, but putting up a tax barrier to their upward mobility certainly won't help them raise the capital to get to the next level. Starving businesses who've already reached this plateau isn't any smarter, since by their nature, they are home-grown enterprises that provide U.S.-based jobs.

Instead of Kerry's reward-punishment approach that uses a shriveled carrot and a clumsy stick, the "corporation" tax -- really just a tax on business owners, managers, investors, employees, and consumers -- should be reduced dramatically.

Restructuring the tax system itself could also free up far more resources for job creation than Kerry's plan could ever hope to provide. By the Tax Foundation's estimate, in 2002 businesses (and by inference their customers) were forced to bear more than half of the $194 billion economic burden of complying with the federal Tax Code.

One place to begin is by ditching antiquated laws allowing the IRS to tax the foreign profits of U.S. companies (most other countries avoid such a policy. As corporate tax rates are reduced, Congress could also clear away the thicket of special-interest deductions and credits that thwart honest competition among businesses.

Even better, Congress could scrap the entire Tax Code and replace it with a single-rate retail national sales tax -- and allow Americans to see the true cost of the federal government, an entity whose questionable bookkeeping exceeds that of any corporate behemoth.

The first Presidential candidate who gets past mere slogans about "job creation" and focuses instead on removing the barriers to productive economic activity could win a new age of prosperity for America -- not to mention the next election.

About the Author

Pete Sepp is Vice President for Communications with National Taxpayers Union.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.