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National Taxpayers Union Statement of Principles: The "Grand Bargain" Strategy

October 7, 2013

Dear Member of Congress:

As Congress considers a possible “grand bargain” strategy to fund the federal government for the current fiscal year and increase the statutory borrowing limit, National Taxpayers Union (NTU) offers the following recommendations on behalf of our 362,000 members.

Do Not Raise Taxes. According to latest estimates from the Congressional Budget Office (CBO), tax revenues as a percentage of GDP are expected to increase to 18.3 percent in 2014, 19.3 percent in 2015, and hover at approximately 19 percent from 2016 through 2023.  With revenues projected to exceed their 40-year average of 17.9 percent of GDP, there is absolutely no need for additional tax hikes. Members of Congress should resist any and all attempts to raise tax rates, close so-called “loopholes” on targeted businesses like those in the energy sector, or implement other revenue raisers such as the falsely named Medicare Part D “rebates.” We understand that language establishing a systemic tax reform process might be included in a grand bargain package. As NTU has stated in the past, overhauling or even scrapping the current laws in favor of a simpler, less burdensome alternative is long overdue. Whether this is undertaken within or outside of grand bargain legislation, it should be motivated by a desire to decrease deadweight losses and increase competitiveness – not to boost revenues to some artificial target level.

Implement Meaningful Entitlement Reforms. Comprehensive reform of Social Security, Medicare and Medicaid is imperative as the programs are projected by CBO to consume 14 percent of GDP by 2038, which would be double the 7 percent average over the past 40 years. Any grand bargain package should create a legislative mechanism for comprehensive reform in the long-term while also enacting more modest changes in the near-term. These could include additional means-testing measures for Medicare; adoption of the Social Security Preservation through Individual Choice Enhancement Act (H.R. 3351 in the 112th Congress), which would provide taxpayers with an annual choice to have their payroll tax rate reduced by two percentage points in return for increasing their normal retirement age for applicable Social Security benefits by one month; and enactment of the Preventing and Reducing Improper Medicare and Medicaid Expenditures Act of 2013 (H.R.2305/S.1123), a bipartisan bill that would improve oversight and reduce waste for two of the federal government’s largest programs.

Preserve the Post-Sequester Spending Caps Established by the Budget Control Act of 2011. In Fiscal Year 2014, the law caps discretionary spending at $967.5 billion. It is imperative for Congress to abide by this limit as the federal government faces a mounting debt crisis. While some will inevitably propose “trading” the caps for various policy changes or the promise of future negotiations, either move would be a highly dangerous for taxpayers. The process established under the 2011 Budget Control Act has been a rare victory for the limited government movement with demonstrable success in helping to reduce discretionary spending. Congress should keep the sequester in place and pursue additional spending restraint, without horse-trading.

Resist Attempts to Include Extraneous Provisions. With very few bills likely to be enacted between now and the end of the year, some in Congress will undoubtedly attempt to attach unrelated or harmful legislation to this vehicle. Such provisions could potentially include a bloated Farm Bill or a dangerous expansion of state tax collection powers known as the Marketplace Fairness Act. Regardless of the merit of any potential “add-ons,” the focus of the grand bargain ought to be limited to funding the federal government and reducing the national debt. Other legislative priorities that do not specifically address these goals should be handled through regular order.

Congress is facing tremendous pressure as a result of the current government funding lapse, the constraints of the debt limit, and the looming entitlement crisis. NTU and our hundreds of thousands of members strongly urge you to consider the concerns of current and future taxpayers as you make difficult policy decisions in the coming days.

Brandon Arnold
Vice President of Government Affairs