The tax burden on the U.S. economy is already too high by historical standards and is crimping growth and hampering recovery as a result, said publisher and one-time presidential hopeful Steve Forbes.
The White House and Congressional Republicans are debating a fiscal framework for 2013, with the Obama administration’s proposal calling of tax hikes on incomes over $400,000 a year, with Republican countering with a proposed hike on incomes of over $1 million a year.
Entitlement reform and spending cuts would narrow deficits and restore the country to fiscal health more than tax hikes would, which have the opposite effect, Forbes said.
“The way you raise revenue is with a vibrant economy. The tax burden on the American economy today is now too high,” Forbes told CNBC.
“We’re now stuck in at best a 2 percent growth mode when we should be growing 3 to 3.5 percent, which we did for 200 years,” Forbes added, pointing out that other developed economies that sought fiscal reforms via tax hikes have condemned themselves to long periods of little to flat growth rates, or worse.
“We see what’s happening in Europe. We see what higher taxes have done there. Japan’s been a binge tax increaser, raising their top rate, doubling their national sales tax, which is why the government got thrown out. So why should we put the same poison in our system?”
House Speaker John Boehner, R-Ohio, has said he’ll take his fiscal propose to the House of Representatives for a vote even though President Barack Obama has said he’ll veto the package in its current form.
Either way, the U.S. economy cannot handle tax hikes right now, even those aimed at the wealthy, who will put off expanding and hiring if they are asked to pay more to the Internal Revenue Service.
“When you have Southern Europe going into severe recession, France and Germany about to go in recession, Japan already in recession, our economy’s beginning to wobble and will wobble early next year,” Forbes told the network.
“Putting on any kind of tax increase is absolutely preposterous. You haven’t done something so foolish since the early 1930s when every country raised taxes as their economy started to decline,” Forbes added.
The U.S. economy is set to see a string of tax breaks and benefits expire at the same time deep cuts to government spending kick in, a combination known as a fiscal cliff that could contract the economy by 0.5 percent, according to estimates from the nonpartisan Congressional Budget Office.
Income taxes on the wealthy continue to spark debate between congressional Republicans and the White House and while both sides have made concessions, a deal still remains out of reach.
Still, some senior Republicans say despite the impasse, a compromise is still possible.
“There’s still enough time for us to finish all of our work before this weekend, if we’re all willing to stay late and work hard,” said Senate Republican leader Mitch McConnell of Kentucky, according to Reuters.