The day after the election, Speaker of the House John Boehner (R-OH) called on President Obama to join in a bipartisan effort to cut federal spending, including by fixing entitlement programs, and to move to a better tax system that allows the economy to grow and create jobs. The Speaker’s call took up the President’s offer on election night to work with leaders of both parties to reduce the deficit and reform the tax code.
The Heritage Foundation has a ready-to-go, detailed plan to achieve the goals that Speaker Boehner and President Obama stated. Our plan—Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity—drives down federal spending toward a balanced budget while fixing entitlement programs and maintaining a strong national defense, with tax reform but without a tax hike.
The New Flat Tax is the key tax reform element of the Heritage plan. The New Flat Tax abolishes the individual income tax, payroll tax, capital gains tax, dividends tax, estate tax, and corporate income tax and instead imposes a simplified, single-rate tax on expenditures of individuals and a single tax on the domestic net cash flow of businesses. The New Flat Tax would tax the amount an individual spends from income, but not any amount the individual saves.
The universal principle of tax-free individual savings would create a strong incentive for pro-growth, job-creating savings and investment. Similarly, the reduction in business tax rates would spur investment, job creation, and competition. A growing, job-creating economy would generate more income and profits, which in turn would yield greater revenue in taxes paid to the government, enabling the government to reduce the amount it borrows.
The Heritage plan for Saving the American Dream reflects the key conservative principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. The Heritage plan contains the detailed actions necessary to implement what Speaker Boehner and President Obama said they wanted to accomplish: cut federal spending, fix entitlements, move to a reformed tax code, support economic growth and job creation, and reduce deficits.
Americans need a growing economy and more jobs, so Congress and the President should not hike taxes and thereby cut economic growth and kill jobs. Also, Americans cherish their political and economic liberties, so Congress and the President should not expand the size, scope, and cost of the federal government. Further, Americans do not want to burden their children and grandchildren with yet more debt, so Congress and the President should not continue to borrow more and more from the future to spend today. Congress and the President should work to cut spending, taxing, and borrowing.
To put America on the right path to prosperity and liberty, Congress and the President should turn the Heritage plan for Saving the American Dream, and especially its New Flat Tax, into law.