Those involved in the fiscal cliff debate should be focused on getting revenue levels back to where they were during the Bush era, said Bill Frezza in an exclusive interview with Newsmax TV.
“You can drive up rates and that actually makes revenue go down – we are going to see that with dividends. We need to keep in mind that even though Clinton had higher tax rates than George Bush, he had lower tax revenue. The best thing that could happen is to go back to the level of tax revenue we collected during the Bush era,” Frezza, a fellow in technology and entrepreneurship at the Competitive Enterprise Institute, said.
Watch the exclusive interview here.
Frezza said the Obama administration proposal of increasing taxes, more stimulus spending, and a promise to possibly discuss budget cuts later is what got the government into the problem it now finds itself in — and on the road to being Greece.
"If we just kick the can down the road, which is probably most likely to happen, we are taking one step closer to Greece,” Frezza said.
In addition to a concern about increasing personal tax rates causing a new recession last year, Frezza sees an already unfair tax code hitting investors and possibly destroying the payouts they receive for injecting money into companies and the stock market.
“Entitlement democracy is all about getting someone else to pay your bills. That’s what we have today – we have an entitlement democracy,” he said. “Right now, two percent of the taxpayers pay fifty percent of the personal income taxes. People believe that’s not fair, that fifty percent should go up to what? What number would you like it to go up to?”
“What they don’t understand is if they’d like a share of revenue from the rich to go up, they better be careful about rates because raising rates doesn’t always raise revenue. When the dividend tax rate goes up from fifteen percent to forty three percent, companies will stop issuing dividends, and the dividend tax revenue will go to zero. That’s where we are headed.”
The government’s overspending problem — which it defines as a revenue problem — already has led Treasury Secretary Timothy Geithner on behalf of President Barack Obama to ask that Congress give up its power to cap how much money the country can borrow at any one time.
The government is expected to hit the current debt ceiling set by Congress within months, which is why the White House is now asking to have the ceiling removed as part of a fiscal cliff fix in order to avoid the bi-annual fight to borrow more money.
“We go through this little kabuki dance every time the debt ceiling comes around,” Frezza said. “Of course, the debt ceiling was going to be raised. It’s very interesting that Tim Geithner suggested that Congress relinquish its power to control the debt ceiling and just hand it over to the president, so that basically the debt ceiling would go away. I don’t think that’s going to happen. Again, you are going to see a constant recurrence of this debt ceiling dance as we spend our way into oblivion.”
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