Tim Pawlenty on Tax Reform
Republican MN Governor
PAWLENTY: No. On financial management, the CATO institute gave only four governors in America their highest grade, an "A" grade. I was one of those governors. As to the circumstance that you mentioned, I had the first government shutdown in 150 years. We did put together a package, but I balanced the budget every time in Minnesota that I was governor. In fact, my last budget ended June 30 of this year with a surplus. I did agree to the cigarette fee. I regretted that. As it turns out the courts later held it to be a fee. But nonetheless, it was an increase in revenues. It turns out we had a new budget forecast a few months later. And we didn't even need it.
The Pawlenty plan would collapse the current six income-tax rates into two: a 10% rate on the first $100,000 of income for couples and a 25% rate on all income above that. Under current law, the top bracket is 35%. Pawlenty said he wouldn't propose ending current deductions, such as those for home-mortgage interest. Taxes would also be eliminated on capital gains, interest, dividends, and inheritance. The corporate income-tax rate would be cut to 15% from 35%, and small businesses would be given the choice to pay that rate or individual income-tax rates.
Pawlenty was a strong proponent of limited government and lower taxes. He was asked before the election: "If a tax increase is absolutely necessary to balance the budget, what kind of tax hike would you favor? His response: "Taxes should be increased only if absolutely necessary. Under such circumstances, any tax increase should be temporary and have an automatic repeal provision. As to the types of taxes that might be increased in emergency circumstances, very small increases on a variety of taxes should be considered to avoid a disproportionate impact by any one tax-paying sector of the state's economy."
The only catch was that his pledge didn't apply to state fees, tuition, or local property taxes, all of which rose. Pawlenty's 60 fee increases in the first year were especially irksome, labeled by some as "stealth taxes." Pawlenty said there was nothing stealthy about them: "People will know exactly what they are paying for the services they get."
A: Senator Obama is for dramatically increasing taxes. And Senator McCain doesn’t believe that’s the way to grow the economy. Obama’s proposals include lifting the cap on Social Security taxes, in terms of income levels; not addressing the AMT very fully. He wants to boost capital gains taxes from 15% to almost double that.
Q: You don’t have a problem with allowing the Bush tax cuts that were implemented in 2001 and 2003 being made permanent, all of the Bush tax cuts, the estate tax plus the tax cuts for the wealthiest Americans, including billionaires?
A: They should have been permanent in the first place. The fact that we’re even having the debate, I think, is silly. But now that they’re going to expire, I think they should continue.
A: They should have been permanent in the first place. The fact that we’re even having the debate, I think, is silly. But now that they’re going to expire, I think they should continue. And keep in mind, when you talk about tax cuts for the wealthy, that involves these reductions in corporate taxes, or increasing the AMT, or the exemptions I had talked about. And when you look at as a basket, it’s the kind of thing we need to do to grow jobs, expand the economy. We can’t tax our way out of this. We’re going to have to grow our way, in part, out of it.
The nation's governors urge you to include state countercyclical funding as part of your legislation to stimulate the economy. This would include $6 billion in Medicaid assistance by freezing scheduled federal FMAP reductions and increasing all states' F Congress approved $20 billion in assistance to states, including $10 billion in Medicaid and $10 billion in block grants. The governors' current stimulus proposal is essentially the same, with the exception that it is a total of $12 billion as opposed to $20 billion. This proposal can be enacted quickly, as there is precedent and it is timely, temporary and targeted.
Additionally, governors appreciate federal efforts to use tax policy to get additional money into the hands of consumers and businesses to stimulate the economy. When considering tax changes to spur economic growth, governors urge Congress and the Administration to follow the maxim of "Do no harm" by avoiding changes at the federal level that would diminish state tax revenues or force state actions that would undermine the effectiveness of federal efforts.
We look forward to working with you to enact the appropriate stimulus program.
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