W HAT IS HOLDING OUR ECONOMY BACK ? H OW CAN WE GET BACK ON TRACK ? 1.
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Transcript of W HAT IS HOLDING OUR ECONOMY BACK ? H OW CAN WE GET BACK ON TRACK ? 1.
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WHAT IS HOLDING OUR ECONOMY BACK?HOW CAN WE GET BACK ON TRACK?
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THE STATE OF THE U.S. ECONOMY• Jobs Crisis– Wisconsin unemployment rate: 7.8%– National unemployment rate: 9.1% – U6 unemployment rate: 16.5%
• Over 6 million Americans have been out of work for over 6 months
• Stagnant economic growth & rising poverty– GDP growth sluggish: 1.3% (Q2 2011, annual rate)
– Poverty rate up to 15.1% in 2010
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3Spain Portugal Ireland Italy Greece United States%
20%
40%
60%
80%
100%
120%
140%
160%
180%
64%
91%
114%120%
152%
100%
TROUBLE AHEAD - EUROPEGOVERNMENT DEBT AS PECENTAGE OF GDP - 2011
SOURCE: IMF
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WASHINGTON MAKING MATTERS WORSE
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WASHINGTON’S SPENDING SPREE
• February 2009: $862 billion ‘stimulus’• Since January 2009:– 23% increase in government bureaucracy budgets– 84% increase when you add stimulus
• President’s budget calls for $46 trillion of government spending over the next decade
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DISAPPOINTING RESULTS OF STIMULUS SPENDING
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q13%
4%
5%
6%
7%
8%
9%
10%
11%
SOURCES: REPORT BY CHRISTINA ROMER, CHAIR OF PRESIDENT’S COUNCIL, “THE JOB IMPACT OF AMERICAN RECOVERY AND REINVESTMENT PLAN” JAN 9, 2009; DEPARTMENT OF LABOR
PERC
ENT
2007 2009 2010 2011 2012 20132008 2014
PREDICTION WITH STIMULUS
PREDICTION WITHOUT STIMULUS
ACTUAL
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TAX UNCERTAINTY
• In 2013, across-the-board hikes on the horizon• 44.8% top federal effective tax rate for small
businesses– With proposed surtax: over 50% – With state & local taxes: nearly 60%
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WISCONSIN IS A SMALL BUSINESS STATEHOW WISCONSIN EMPLOYERS PAY THEIR TAXES
FILE AS CORPORA-
TIONS10%
FILE AS IN-DIVIDUALS
90%
SOURCE: ERNST & YOUNG LLP
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REGULATORY UNCERTAINTY
• Total cost of federal regulations: $1.75 trillion• 3,573 new regulations in 2010– 4,257 new regulations in the works– 219 planned regulations estimated to adversely
impact the economy by over $100 million
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UNCERTAINTY FROM HEALTH CARE LAW
159 new boards, bureaucracies & programs
1,472 waivers from law’s requirements
$2.4 trillion of new spending
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A BETTER PATH FORWARD:
THE PATH TO PROSPERITY
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THE PATH TO PROSPERITYHOUSE-PASSED BUDGET & PRO-GROWTH REFORMS
Spending Restraints and Reforms
Pro-Growth Tax Reform: Fair, Simple, Competitive
Predictable, Reasonable Regulatory Environment
Patient-Centered Health Care Reform
An American Energy Policy
Strengthened Social Safety Net
budget.house.gov
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ADDITIONAL SLIDES
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bottom 20% second middle fourth top 20% top 1%$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
WHO BENEFITS FROM TAX LOOPHOLESAVERAGE PER PERSON BENEFIT BY CATEGORY OF EARNERS
SOURCE: TAX POLICY CENTER/IRS
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10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
TOP INCOME TAX BRACKET
TOTAL TAX REVENUE AS PERCENT OF GDP
INCOME TAX REVENUE AS PERCENT OF GDP
TAX REVENUES DO NOT CORRELATE WELL WITH TAX RATES
FISCAL YEAR
SOURCE: HERITAGE FOUNDATION
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TAX REVENUES ARE HIGHLY CORRELATED WITH GDP
REAL 2006 GDP ($BILLIONS)
REAL 2006 TAX REVENUES ($BILLIONS)
1950 1960 1970 1980 1990 2000
$3,500
$7,000
$10,500
$14,000
$500
$1,000
$1,500
$2,000
$2,500REAL TAX REVENUE
REAL GDP
SOURCE: HERITAGE FOUNDATION
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2011, Top Statutory Rate President's Top Tax Rate0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
35.0%39.6%
2.0%
2.3%0.9%
Nondeductible Medicare Tax Medicare tax on wages/salaryPEP/Pease provisions reinstated,2011 Expiration of 2001/2003 tax rates,2011
TOTAL = 44.8%
PRESIDENT’S TAX HIKES
SOURCE: IRS, PRESIDENT’S FY2012 BUDGET, HOUSE BUDGET COMMITTEE ESTIMATES
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Bottom 50% Top 1% Top 5% Top 25% Top 50%0%
20%
40%
60%
80%
100%
120%Before Tax ReliefAfter Tax Relief
SOURCE: IRS
TAX CODE MORE PROGRESSIVE AFTER TAX RELIEFBREAKDOWN OF TAX BURDEN BY INCOME LEVEL – 2001 VS. 2008
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Lowest Individual Rate Middle Individual Rate Top/Corporate Tax Rate0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
10%
25%
35%
19%
47%
66%
25%
63%
88%
200820502081
SOURCE: CBO
CHASING HIGHER SPENDING WITH TAXES(INCREASE IN TAX RATES NECESSARY TO KEEP PACE SPENDING)
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Japan U.S. France Spain Italy China Poland Canada*%
5%
10%
15%
20%
25%
30%
35%
40%
45%
40% 39%
34%30%
28%25%
19%15%
SOURCE: ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT*=CANADA 'S CORPORATE TAX RATE WILL DROP TO 15% IN JAN-UARY 2012
CORPORATE INCOME TAX RATES
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1947 1955 1963 1971 1979 1987 1995 2003 2011 2019 2027 2035 2043 2051 2059 2067 2075 208310
20
30
40
50
60
70
80
Spending Tax Revenue
Ch WE ARE IN A SPENDING-DRIVEN DEBT CRISISHISTORIC/PROJECTED SPENDING & REVENUE AS A PERCENTAGE OF THE ECONOMY
SOURCE: OFFICE OF MANAGEMENT AND BUDGET HISTORIC TABLES, CONGRESSIONAL BUDGET OFFICE; PROJECTIONS BASED ON THE CBO’S ALTERNATIVE FISCAL SCENARIO.
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WHAT DRIVES OUR DEBT(GOVERNMENT SPENDING AS SHARE OF ECONOMY)
19701976198219881994200020062012201820242030203620422048205420602066207220780%
5%
10%
15%
20%
25%
SOURCE: CBO
PROJECTED TAX REVENUE
SOCIAL SECURITY
MEDICAID & OTHER HEALTH
MEDICARE
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WHO OWNS OUR DEBT(DEBT HELD BY PUBLIC, 1970-2011)
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