Paul Ryan: Taxing Times

By Congressman Paul Ryan

This week, President Barack Obama spoke about the budget debate before us, stating, “I welcome and encourage proposals and improvements from both Democrats and Republicans in the coming days.” I serve as Ranking Member of the House Budget Committee, and intend to take the President at his word, and will soon offer my improvements and alternatives to his budget proposal.

Congress has already shoveled trillions of taxpayer dollars out the door in the past month. The recently enacted ‘stimulus’ package and $410 billion spending bill packed with pork further add to the already crushing burden of debt, while clinging to the failed ideology that we can spend our way into prosperity. The President’s budget provides even greater fiscal and economic recklessness – with massive tax hikes on all Americans in the midst of a recession, and an explosion in new spending – doubling the debt within a decade.

This breathtaking budget encompasses a fundamental shift away from the animating spirit of America – the entrepreneurialism and innovation made possible by our economic freedom and individual liberties. This ambitious budget begins to replace America’s commitment to the equality of opportunity with the stagnant European notion of enforced equality of results. At a time when we desperately need a pro-growth economic agenda, we cannot afford to fall deeper into stagnation.

While there is much to uncover in the President’s budget (for more:, I’d like focus on one specific element of the President’s budget that raises heightened concern for Wisconsinites: the cap-and-tax.

The budget’s so-called ‘cap-and-trade’ proposal would raise taxes by at least $646 billion on families’ natural gas, electricity, home heating, and gasoline bills. This would not only hit families in cold-weather states, such as Wisconsin, disproportionately hard, but would further erode job growth among U.S. manufacturers. This unilateral energy tax would put Wisconsin manufacturers at a further competitive disadvantage with countries such as China that have no intention of inflicting a similar tax on their businesses. Already devastated by mass layoffs, Wisconsin simply can’t afford this costly “cap-and-tax” scheme.

The President needs these tax hikes to finance his additional spending and at the same time give the illusion that “cutting the deficit in half” results from real budgetary restraint – when in fact it would happen anyway if the President and Congress did nothing.

The budget proposes to begin capping carbon emissions beginning in 2012. This new policy would impose a $79-billion annual cost to the economy – or $646 billion over 10 years – by making carbon-based energy more expensive. According to a recent economic study, similar cap-and-trade policies would raise energy prices by an average of $516 per year for each household. When the costs of other energy intensive goods are included, households would need to spend an extra $1,100 on average under this new policy. The administration claims the burden of increased energy prices would be eased by returning most of the new revenue to taxpayers through the Make Work Pay tax credit. But the credit is not available to seniors and those who do not work. A conservative estimate also shows this proposal could lead to as many as 1.5 million job losses by 2015.

It is important to note that Treasury routinely assumes excise taxes reduce incomes in the affected industry and for others throughout the economy, and offsets the revenue gain by 25 percent. Consequently, the $646 billion actually understates the impact of the cap-and-trade policy. The actual burden on consumers will be $860 billion.

To be clear, where we can find common ground, I welcome the opportunity to work with the President. I commend the President for including some good proposals in this budget, proposals that I have long advocated, including agricultural subsidy reform and honest accounting for the Alternative Minimum Tax. But if reaching compromise means pursuing policies I believe will do more harm than good – I simply can’t go along.

We can and we must do better than this budget proposal. As Ranking Member of the House Budget Committee, I am working on a number of improvements and alternatives to put forth a budget that promotes solid, sustainable economic growth, limits Federal spending to realistic levels, and sets a path that ensures our nation can prosper.

Congressman Paul Ryan serves Wisconsin’s 1st Congressional District. To contact him by phone in Washington, D.C., call (202) 225-3031. Or visit Paul Ryan at

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Paul Ryan