Paw­lenty pro­poses deep cuts in fed­eral spend­ing, tax rates

The Washington Times Weekly - - Politics - BY SETH MCLAUGH­LIN

Repub­li­can pres­i­den­tial con­tender Tim Paw­lenty on June 7 rolled out his plan to boost eco­nomic growth, call­ing on Congress to dra­mat­i­cally al­ter the nation’s tax sys­tem and to en­act sweep­ing cuts in fed­eral spend­ing, all part of his broader push to woo con­ser­va­tives in the party pri­maries.

The for­mer Min­nesota gov­er­nor also set a goal of av­er­ag­ing sus­tained eco­nomic growth of 5 per­cent a year over the next decade, some­thing that hasn’t been achieved in the past six decades, and he said that would help make up the lost rev­enue from his pro­posed tax cuts.

Speak­ing at the Univer­sity of Chicago, Mr. Paw­lenty said that the cor­po­rate-tax rate should be slashed by more than half and in­di­vid­ual tax rates should be squeezed into two brack­ets, 25 per­cent for those mak­ing $50,000 or more a year and 10 per­cent for those mak­ing less. He said taxes on cap­i­tal gains and div­i­dends should be scrapped, along with the es­tate tax.

“Once we un­leash the cre­ative en­ergy of Amer­ica’s busi­nesses, fam­i­lies and in­di­vid­u­als, as we did in the ‘80s and ‘90s, a boom­ing job mar­ket will re­duce de­mand for gov­ern­ment as­sis­tance, and ris­ing in­comes will in­crease fed­eral rev­enues,” he said.

On the spend­ing side, Mr. Paw­lenty said Congress and the pres­i­dent should slow the rate of growth in de­fense spend­ing and cut 5 per­cent from the bot­tom­line spend­ing to­tal. He also em­braced a bal­ance bud­get con­sti­tu­tional amend­ment, a pro­posal that re­peat­edly has failed to clear Congress, but which he said could help limit an­nual fed­eral spend­ing to about 18 per­cent of gross do­mes­tic prod­uct.

He said the moves could put the coun­try on course to reach his “goal” of 5 per­cent an­nual rev­enue growth.

But it’s un­clear whether his plan is re­al­is­tic and how such a dra­matic dip in tax rev­enues would af­fect the na­tional deficit, which is pro­jected to reach about $1.6 tril­lion this year.

Mr. Paw­lenty’s sole rev­enue in­crease comes from end­ing “spe­cial-in­ter­est hand­outs, carve­outs, sub­si­dies and loop­holes” to cor­po­ra­tions. He said the sav­ings could help cover the cost of slic­ing the cor­po­rate-tax rate to 15 per­cent from 35 per­cent. The plan, how­ever, doesn’t take away any in­di­vid­ual tax ex­emp­tions, such as the pop­u­lar mort­gage-in­ter­est de­duc­tion, a strat­egy that Pres­i­dent Obama’s deficit re­duc­tion com­mis­sion rec­om­mended last year as a way to off­set the rev­enue lost by re­duc­ing in­di­vid­ual tax rates.

On June 7, Rep. Deb­bie Wasser­man Schultz of Florida, the new chair­woman of the Demo­cratic Na­tional Com­mit­tee, said Mr. Paw­lenty’s plan is a “pre­scrip­tion for eco­nomic disas­ter.”

“Mr. Paw­lenty would take the Repub­li­can poli­cies of the last decade, which ex­ploded our deficit and debt and nearly sank our econ­omy into a sec­ond Great De­pres­sion, and in­ject them with steroids,” she said.

Bud­get hawks said his plan will need to in­clude deeper spend­ing cuts.

“If Tim Paw­lenty ex­pects to be taken se­ri­ously with his plan for cut­ting gov­ern­ment spend­ing, he can’t leave the mil­i­tary bud­get off the ta­ble,” said the Cato In­sti­tute’s Christo­pher Pre­ble. “The Pen­tagon’s bud­get has prac­ti­cally dou­bled over the last decade.”

But Chris Cho­cola, pres­i­dent of the Club for Growth, an in­flu­en­tial anti-tax group, de­fended Mr. Paw­lenty’s pro­posal as “strong, pro-growth tax and bud­get re­forms that will spur eco­nomic growth and cre­ate jobs.”

“He is ex­actly right in call­ing for clean­ing up the tax code by in­sti­tut­ing flat­ter tax rates and elim­i­nat­ing tax loop­holes and give­aways,” Mr. Cho­cola said, ap­plaud­ing his push for a bal­anced bud­get amend­ment. “His sup­port for cut­ting the cor­po­rate tax rate, elim­i­nat­ing the cap­i­tal-gains tax and div­i­dend tax is out­stand­ing.”

ASSOCIATED PRESS

For­mer Min­nesota Gov. Tim Paw­lenty, a Repub­li­can pres­i­den­tial hopeful, out­lines his pro­pos­als for jump-start­ing the econ­omy in an ad­dress at the Univer­sity of Chicago.

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