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

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

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

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

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

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

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

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

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

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

WHO OWNS OUR DEBT(DEBT HELD BY PUBLIC, 1970-2011)

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