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Pawlenty budget plan: Fewer tax brackets and 'Google test' cuts

WASHINGTON — Tim Pawlenty will call for a dramatic overhaul of the tax code in his first major address on economic policy since launching his presidential campaign, as well as deep cuts to what he calls duplicative federal programs.

In an editorial in the Chicago Tribune, Pawlenty gave some details on his plan: Aim for 5 percent economic growth, cap and block grant Medicaid, gradually raise the Social Security retirement age, cut the business tax rate to 15 percent (currently 35 percent) while removing so-called "special interest handouts, carve-outs, subsidies and loopholes," cut personal tax rates and freeze federal spending until the budget is balanced.

Below are additional excerpts of the speech that were provided to members of the media, including MinnPost, in advance of the address. Pawlenty's address is set to begin at 10 a.m. Central from the University of Chicago.

We'll have much more coverage and in-depth analysis of his speech later today and on Wednesday.

Governor Pawlenty on setting an economic growth goal:

“The United States is still home to the most dynamic and entrepreneurial people in the world. They’re all around us, ready to innovate, invest, compete, and create new businesses and jobs. That will mean opportunities for everyone.

“They have been discouraged and weighed down by President Obama’s big government and heavy handed regulations. …

"Let’s start with a big, positive goal. Let’s grow the economy by five percent, instead of the anemic two percent envisioned currently.

“Such a national economic growth target will set our sights on a positive future and inspire the actions needed to reach it. By the way, five percent growth is not some pie-in-the-sky number. We’ve done it before, and with the right policies, we can do it again.”

Governor Pawlenty on business tax reform:

“American businesses today pay the second highest tax rates in the world. That’s a recipe for failure, not adding jobs and economic growth.

“We should cut the business tax rate by more than half. I propose reducing the current rate from 35% to 15%. But our policies can’t just be about simply cutting rates. They must also promote freedom and free markets. The tax code is littered with special interest handouts, carve-outs,subsidies, and loopholes that should be eliminated.”

Governor Pawlenty on individual tax reform:

“Just changing business tax rates is not enough. That’s because we know most job growth will come from small and medium size businesses -- typically structured as S corps or LLCs -- and their owners are taxed under individual tax rates, not corporate tax rates.

“So, pro-job and pro-growth tax reform must include individual tax reform as well. Small business owners and hard working Americans need a better deal too. Small businesses should also have the option of paying at the corporate rate.

“On the individual rates we need a simpler, fairer flatter tax system overall. I propose just two rates: 10% and 25%. Under my plan, those who currently pay no income tax would stay at a zero rate. After that, the first $50,000 of income – or $100,000 for married couples – would be taxed at 10 percent.

“Everything above that would be taxed at 25 percent. That’s it. A one-third cut in the bottom rate to allow younger, middle, and lower-income families to save andbuild wealth. And a 28 percent cut in the top rate to spur investment and job creation.

“In addition, we should eliminate altogether the capital gains tax, interest income tax, dividends tax, and the death tax. Government has no moral or economic basis to claim a second share of the same income. When you deposit a dollar in your bank account, every penny should be forever more yours and your children’s, not the federal government’s."

Governor Pawlenty on Government Spending:

“I know government can cut spending, because I did it in Minnesota. I cut state spending in real terms for the first time in our state’s history. We did it with priority-based budgeting. We did it by setting a record for vetoes. It took a government shutdown and a long government union strike, but we got it done. We didn’t close our schools or empty out our prisons. We cut spending where it needed to be cut. We can do the same thing in Washington. …

“There are some obvious targets. We can start by applying what I call ‘The Google Test.’ If you can find a good or service on the Internet, then the federal government probably doesn’t need to be doing it. The post office, the government printing office, Amtrak, Fannie and Freddie, were all built for a time in our country when the private sector did not adequately provide those products. That’s no longer the case.”

"So I propose that Congress grant the President the temporary and emergency authority to freeze spending at current levels, and impound up to 5% of Federal spending until such time as the budget is balanced. If they won’t do it…I will. As an example, cutting even 1% of overall federal spending for six consecutive years would balance the federal budget by 2017."

Governor Pawlenty on Regulatory Reform:

“Federal regulations will cost our economy $1.75 trillion this year alone, it’s a hidden tax on every American consumer, built into the price of every good and service in the economy. And make no mistake: the current Administration is hunting far bigger game than the incandescent light bulb.

“Under ObamaCare’s individual and employer mandates, America’s private health care market is in intensive care, with a bad prognosis.

"The Dodd-Frank financial regulation bill called for more than 200 new rules to be written by more than ten federal agencies, none of them resolving the catastrophic scandal of Fannie Mae and Freddie Mac. Months after the law went on the books, no one yet knows exactly what the law is. …

“I will require sunsetting of all federal regulations, unless specifically sustained by a vote of Congress.”

Governor Pawlenty on President Obama's Class Welfare:

“Regrettably, President Obama is a champion practitioner of class warfare. Elected with a call for unity and hope, he has spent three years dividing our nation, fanning the flames of class envy and resentment to deflect attention from his own failures and the economic hardship they have visited on America."

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Comments (22)

"Aim for 5 percent economic growth, cap and block grant Medicaid, gradually raise the Social Security retirement age, cut the business tax rate to 15 percent (currently 35 percent) while removing so-called "special interest handouts, carve-outs, subsidies and loopholes," cut personal tax rates and freeze federal spending until the budget is balanced."

Holy crap, he read my email. That's almost exactly what I would do. The only difference would be to cut corporate tax rates to 5% to better attract foreign manufacturers to build their plants here. It would not only create millions of new jobs but it would cause American manufacturers to consider bring some of their jobs home.

I'll go you one better.

Flat sales tax. everyone pays 15 cents on the dollar national sales tax.

No income tax.
No investment tax.
No death tax.
No paperwork
No IRS... Well, staffed by 1000 people, anyway.

Saving is rewarded, spending is penalized.
Everyone puts in equally according to their consumption. The rich spend more, and pay more. The poor spend less, and pay less.

And all without a massive bloated federal agency of over 3 million reading billions of pages of tax codes.

Amazing.

Three comments:

Tax cuts and freezing spending do nothing to erase a structural deficit of about a trillion dollars a year.

A 5% GDP annual real growth rate has not happened since the 1980's and the 10 year average real GDP growth has been well under 5% since 1950. While "magic ponies" all around would be wonderful also, it ain't going to happen. Not even by Pawlenty saying it will be so.(http://usbudget.blogspot.com/2009/02/real-gdp-growth.html)

As for the "Google test", there are lobbyists and political consultants that could easily replace our government, there are printing companies that can print dollar bills to replace the treasury, there are security companies that can replace police and military, there are private hospitals that can replace the VA systems, there are plenty of contractors and engineers to build infra-structure, and on and on.. In fact there is probably a cheaper 10 year old that could replace Mr. Pawlenty and his invaluable "wisdom".

Is this a joke? The google test...really! Good luck getting a clean drink of water after T-Paw guts those costly regulations. But what will anyone care when they can buy all the prescription drugs in the world via the google.

The class war in this country is being fought for and by the extremely well off, not by the rest of us. Working class incomes have stagnated over the last 25 years while the very wealthy have seen their income increase.

In 2005 wild-eyed socialist Allan Greenspan said of growing inequality: "As I've often said, this is not the type of thing which a democratic society – a capitalist democratic society – can really accept without addressing."

Pawlenty is absolutely right about the class warfare issue, however he proposes keeping an income tax with tax brackets which will continue to provide the class warfare users with a foundation.
He needs to get behind the FairTax and get rid of the IRS and the 60,000 pages of BS that no one can comprehend. Stop taxing income, as that is counter-productive. The FairTax will stimulate the economy and generate millions of jobs. Read about it at FairTax.org.

Rod - Income tax compliance is over 90%. How is that unsuccessful? Right, you want to slash taxes on the wealthy. The income tax should be reformed but replacing it with a consumption tax wouldn't raise revenue needed to pay for popular and vital programs like Social Security, Medicare and the military. Also, taxing consumption will lead to tanking consumer spending which is the last thing our country needs during this severe downturn. Conservatives don't care about any of those facts. Cutting rich people's taxes is the priority.

Dennis -

T-Paw's tax cuts will deliver a pony to every child too. Get real. Automation and low foreign wages have driven the decline of American manufacturing, not taxes. Short of instituting a $10 a day maximum wage and banning robots, American manufacturing will not generate large increases in employment.

For those of you who think gutting regulations is a bad idea, just consider the mountain of needless regulations already in place. Hear of the family in the Midwest fined $90,000 for raising rabbits in the backyard without a permit? Thank the USDA. Hear of the Amish farmer charged for selling "raw milk" after a year long investigation? How about the regulation that bans incandescent light bulbs?

Anyone in business will tell you regulation and tax code complexity is killing industry. If you want more jobs, it's simple. Leave us alone!

If you think health care needs some improvements, wait until Obamacare is all in. The results will be a disaster. Don't take my word for it, look north of the border in Canada, where the population is better educated and overall healthier, but survival rates for cancer heart disease and diabetes are all lower. This isn't a right or left wing issue, it's simple common sense.

The government does FAR too much now, and needs to be starved. Dept of Education? Seriously? Aren't schools local? ATF? Really? We need a seperate police force for alcohol tobacco and firearms? DEA? Aren't they cops like the ATF and FBI? Labor Department? What, for the child slavery happening? The list goes on and on and on. The rulers never met a law they didn't like, or a regulation we don't need. Nearly every regulation they enact is an attack on our freedom, and it needs to be stopped.

When you stop seeing people as members of a particular class that are a part of the national collective and begin seeing them as individuals in a free society, you can easily embrace the ideas like eliminating the tax on labor or privatizing most of today's federal government or eliminating the corporate income tax and the death tax and letting the market decide winners and losers.

Until that happens you'll be forever trapped in the envy and victimology that fuels the American Left.

Here we go again....its like those loan sharks who tell you your monthly payment will only be blah...blah...blah....

Listen! Its not what they tax....its what they spend and we still fall for this crap.

Where are the federal budgets?

That's what important and those people who say we can starve the federal monster by not paying tax fodder are delusional - they have a key to our pantry through debt and the printing of counterfeit money.

So...

Tim Pawlenty's "budget plan" is going to be the equivalent of digging back to the very back of the bottom of our national refrigerator,...

for all those "amazing and wonderful" ideas like...

supply-side economics (which NEVER worked for the general population, since that "rising tide" just allowed the biggest boats to economically cannibalize anything of value from the smaller boats, then swamp them or run them over),...

privatizing government services (which ALWAYS costs the taxpayers more because of the need to pay overcompensated private CEOs and corporate boards, and the need to fund massive political campaign contributions to keep the taxpayer's money dropping in your already fabulously wealthy lap),...

self-financing tax cuts (which work just as well and in just the same way as that self-financing new car whose "savings" were going to actually preclude ever having to make any payments on the financing),...

and any number of other things that, once tried and shown to be abject failures by Raygun, Elderbush, and Bushco, were pushed to the back and left there,...

now resembling nothing so much as experiments in degradation and decay being performed in containers tended by Dr. Moreau,...

But former Gov. Pawlenty will now pull out those rotting leftovers and try to serve them cold to the nation carefully-disguised,...

proclaiming them to be a delectable delicacy rather than the toxic poison they had already been proved to be before they were pushed to the back of the bottom shelf in the hopes that they would just disappear.

Is it any wonder that, no matter how hard he tries to sell his soul to the highest bidder, nobody's buying?

Top Five States with Highest State Tax Burden

(as a percentage of income)

Maine 13.5%
New York 12.9
Minnesota 11.9
Hawaii 11.7
Ohio 10.0

That's you Minnesota ip there at number three.

Being a slave to government makes the quality of life "special" in Minnesocialist

This is just recycled Republican magic plan economics... cut taxes and oversight and wait for the magic to happen. Someone really should tell this conservative Christians there really is not such thing as magic.

This is Pawlenty's idea of new ideas? The suggestion that if it can found in the yellow pages the government shouldn't be doing it is a standard Norquist line for 20 years, he thinks making it Google makes it new?

What's your source, Frykman? The Minnesota Department of Revenue's tax rankings has Minnesota as 25 out of 51 states for own source revenue as a percentage of income.

http://taxes.state.mn.us/legal_policy/pages/research_reports_tax_ranking...

If you're going to spout off, at least get your facts correct.

Bruce,

You know who's got really low taxes? Somalia, Bangladesh, Nigeria, and East Timor. Why do you want to turn Minnesota into a third world economy? Why do you hate America?

Cutting taxes at the highest income levels and extending
those cuts? Isn't that supposed to be creating jobs? Seems
most job creation lately is in the service sector or
sending them offshore where labor is cheap. At least Henry Ford recognized that he needed to pay his workers a decent
wage so they could afford to buy one of his vehicles. How
many wage earners working at Walmart or McDonalds will
it take for a family to afford to buy a hybrid or electric
car? Most jobs being created now are in the service economy.
How will that lift us out of the state we're in if people
can't afford to buy anything?

My mistake, #13 for the list, not #5. Single-payer
for MN!!

Pawlnety's plan may continue the trend of record corporate profits for multinationals and large US corpoarations but it woudl spell unrelenting and continuous economic disaster for middle class America and the poor. All of the programs that must be cut in order to cut taxes for the rich are necessary to maintain a healthy middle class. In addition, if Pawlenty has his fantasy fulfilled, health care will become unaffordable or at best catastrophic in nature and reaking havoc on the ability of nearly everyone to maintain a decent standard of living. The idea that he will turn health care over to the private sector for exclusive competition, etc. is a dream not tied to any reality anywhere. In fact his entire economic plan is based on a conservative fantasy that has never played out as theorizied in any country. Obama's Affordable Patient Care Act is already lowering premiums as it is requiring insurance companies to spend over 80 percent (as opposed to just under 60 percent) of the premium dollar on actual patient care. Pawlenty's lie played out in Minnesota where he left us in massive debt. That is the big lie, you cannot continue programs that benefit society, the elderly and the middle class (enabling them to actually exist) and reduce spending to match his level of tax cuts. Without some degree of wealth redistribution in the form of social security, medicare and subsidized education Pawlenty's unregulated capitalism will turn the US into a feudal society. All of those environmental protections initiated by Nixon to improve the environment of our world are quaint to Pawlenty. He'd return us to the days of burning rivers, silent springs and robber barons. Un*#^!!(*believable.

" Don't take my word for it, look north of the border in Canada, where the population is better educated and overall healthier, but survival rates for cancer heart disease and diabetes are all lower. This isn't a right or left wing issue, it's simple common sense"

The differences in survival rates are very minor, and as you point out, people in Canada are healthier overall. The kicker is that people in Canada spend far less on health care than we do, and everyone gets coverage. You are right that its not a left or right issue - anyone with a shred of common sense would recognize that Canada's health care system is much better than ours. The conservatives are running Canada right now, and even they would never dream of going to our terrible system.

The Fair Tax? Even Pawlenty's tax plan is more progressive than the Fair Tax, which will result in massive cuts for the rich and huge tax increases for the poor and middle class.

"The Fair Tax? Even Pawlenty's tax plan is more progressive than the Fair Tax, which will result in massive cuts for the rich and huge tax increases for the poor and middle class."

A "Fair" tax would tax everyone the same amount not the same percent or any graduated scale. You want all men to be treated equal then all men should pay the same amount... Bill Gates or John Doe should each pay the same dollar amount.... the simple fact that one man decides to make money instead of being satisfied by being a bum should mean nothing, each one is provided the same protections by the US government so each should pay the same amount. That would be "Fair"... anything else is grossly unfair.

Michael Britt,

I've been saying the same thing for years. The rate may have be a bit higher at first so there is some surplus to work down the debt but after that I think you are right on target. Everyone pays their fair share this way. You can buy the GM version of an SUV or you can buy the blinged out Cadillac version for $20K more but you are going to pay the taxes on that $20K, it's the consumer's choice. Secondly the government needs to live within it's means like the rest of us. If we don't have the money we don't give $2B to Brazil so they can produce oil and sell it to China. Brazil has enough money to do this on their own and $2B would go a long way to digging new well here at home.