I have received many comments and emails in response to the Semper Fi Act that I introduced into the House of Representatives last week.  I feel that it is necessary to give you an update on what has happened since my posting last week.

The nation has literally erupted in protest in reaction to the decision from the Berkeley City Council telling the Marines that their recruiting office is not welcome in their city, and if recruiters choose to stay, they do so as “uninvited and unwelcome intruders”.

Last night, the City Council met once again and decided to rescind the letter to the Marine Corps.  This is an ineffectual attempt at appeasing the situation and I have no intention of rescinding the Semper Fi Act (H.R. 5222). To say that the Marines are welcome but they strongly object to the recruitment of young people into the Marine Corps is ridiculous. It's like saying I love hamburgers but strongly oppose them if they are cooked and made out of meat.  Furthermore, according to press accounts, the radical anti-war group Code Pink will still be granted use of the parking space in front of the recruiting office once a week for six months and a free sound permit for protesting once a week.

Even with this toothless change, the Berkeley City Council continues to indicate that they have a disdain for and lack of appreciation for the Marine Corps, and the service they provide to the country.

You might have heard about Berkeley’s City Council's recent vote to tell the Marines to close their recruiting station in the city. With this vote, they told the Marines that their recruiting office is not welcome in their city, and if recruiters choose to stay, they do so as an uninvited and unwelcome intruders.

In response to this, I will be introducing the “Semper Fi Act” in the House of Representatives.  This act rescinds all of the funding contained in the FY 2008 Omnibus Appropriations Act for the City of Berkeley, CA and transfers those funds to the Marines for recruiting

During the meeting, the City Council also voted to give protest group Code Pink a parking space in front of the recruiting office once a week for six months and a free sound permit for protesting once a week. According to the City Council agenda, they "Encourage all people to avoid cooperation with the Marine Corps recruiting station, and applaud residents and organizations such as Code Pink, that may volunteer to impede, passively or actively, by nonviolent means, the work of any military recruiting office located in the City of Berkeley."

The Marine Corps has been protecting Americans and our freedoms for 233 years.  Americans understand and appreciate that. You don’t have to join the Marine Corps, or even like it, but you should at the very least let the Marines do their job and respect them for it.

The action by the Berkeley City Council indicates that they have a disdain for and do not appreciate Marines for what they do and have done for this country, our democracy, and our freedoms.  If they have so little respect and understanding of that, there is no reason for the rest of us, outside the city of Berkeley, to subsidize their actions with our taxpayer funds.

In light of the debate over the economic stimulus package, many people have forgotten about the impending danger of major tax increases.  Below are some of the tax increases you will get if Congress does nothing.  These increases will be automatic unless Congress does something to stop them. 

This is yet another reason why I opposed the stimulus package.  Making the current tax rates permanent is more important than any one time wealth redistribution that is disguised as a rebate.

2008:

• The exemption for the Alternative Minimum Tax (AMT) will decrease from $44,350 to $33,750 for single filers and from $66,250 to $45,000 for married couples filing jointly.
• Taxpayers will not be allowed to deduct their state and local general sales taxes from their federal income tax. 
• Taxpayers will not be able to adjust their income for qualified tuition and related expenses.
• Businesses will not be able to claim a tax credit for research, experimentation, and development activities.
• First-time homebuyers in the nation’s capital will no longer be able to claim a tax credit.

2009:

• Taxpayers will no longer be able to claim a tax credit for certain residential energy efficient property, a tax credit for the construction of new energy efficient homes, or a tax deduction for energy efficient commercial building property.

2010:

• The Section 179 business expensing cap will decrease from $128,000 (plus inflation after 2008) to $25,000, and the starting point for the phase-out of this deduction will decrease from $510,000 (plus inflation after 2008) to $100,000.

2011:

•   The marginal income tax rates will increase as follows:

                    --35% bracket will increase to 39.6%

                    --33% bracket will increase to 36%

                    --28% bracket will increase to 31%

                    --25% bracket will increase to 28%

                    --10% and 15% brackets will condense to 15%

• The capital gains rates for individuals will increase from 15% and 0% to 20% and 10%.
• Dividends will no longer be taxed at the capital gains rates for individuals, thereby increasing the double taxation of dividends by as much as 62%.
• The standard deduction for couples as a percentage of the standard deduction for singles will decrease from 200% to 167%--restoring the marriage penalty.
• The top end of the 15% marginal income tax bracket for couples as a percentage of the top end for singles will decrease from 200% to 167%--restoring the marriage penalty.
• The child tax credit will decrease from $1,000 to $500.
• The “death” tax using the “stepped up” basis will return with a 55% maximum rate (including surtax) and a $1 million exemption, after years of decreasing “death” tax rates, increasing exemptions, and one year using the “carryover” basis to calculate the tax due. 

Today, the Institute of Policy Innovation (IPI) awarded “A’s” in Tax Policy 101 to thirty-five members of the House.  Not coincidentally these thirty-five members all voted against the “stimulus package” that passed the House on January 29.  Yours truly was among them.  In fact, I was the only one to speak out against the package on the floor.  You can find the ten Democrats and the twenty-five Republicans that also voted against it below.

Brian Baird (D-WA)
Marion Berry (D-AR)
Allen Boyd (D-FL)
Paul Broun (R-GA)
Michael Burgess (R-TX)
John Campbell (R-CA)
Howard Coble (R-NC)
Jim Cooper (D-TN)
Barbara Cubin (R-WY)
Tom Davis (R-VA)
Nathan Deal (R-GA)
Jeff Flake (R-AZ)
Randy Forbes (R-VA)
Phil Gingrey (R-GA)
Louie Gohmert (R-TX)
Virgil Goode (R-VA)
Duncan Hunter (R-CA)
Tim Johnson (R-IL)
Marcy Kaptur (D-OH)
Jack Kingston (R-GA)
John Linder (R-GA)
Ron Paul (R-TX)
Collin Peterson (D-MN)
Ted Poe (R-TX)
Tom Price (R-GA)
Dana Rohrabacher (R-CA)
Ed Royce (R-CA)
Loretta Sanchez (D-CA)
James Sensenbrenner (R-WI)
John Shadegg (R-AZ)
Adam Smith (D-WA)
Tom Tancredo (R-CO)
Gene Taylor (D-MS)
Lynn Westmoreland (R-GA)
Robert Wexler (D-FL)

The President released his budget for Fiscal Year 2009 today.  If it seems like we’ve just finished the whole budget charade, it’s because we did.  Anyhow, I have not had a chance to read the whole thing yet, but here is link if you would like to read up. 

Please check back, updates will be forthcoming.

Last week the House approved a so-called “economic stimulus” package.  I opposed this bill in part because it will send checks to those who don’t pay any income tax…and yes that includes the millions of people who file fraudulent tax returns in order to take advantage of the Earned Income Tax Credit (EITC).

The EITC is a fraud infested program that sends people a check of up to $4,716 if they claim they made less than $12,590 last year (single filer).  Statistically, roughly 1/4 to 1/3 of these EITC returns are based on phony or falsified claims.  The IRS estimates that between 27 and 32 percent of EITC dollars claimed are fraudulent.

Think about it, 22-millon EITC returns were filed in 2006; which generated checks from the government totaling $43.7 billion. If you run the numbers, you will find that 1/3 of 22-million is 7.3 million.  That’s 7.3 million claims a year that are a scam.  The cost to the taxpayer is somewhere in the area of $11-billion to $14.6 billion.

Under this “bipartisan plan” checks will be sent to those who make $3,000 or more per year.  These people don’t pay income tax and the people that do disclose their income, it’s for only one reason….to file for an EITC check.  Now, under this plan, they will get a bonus of $300 each—including fraudulent returns.

The IRS also estimated that 15% of all tax fraud that occurs is filed by prison inmates!  In 2004, over 18,000 of these claims were detected. 

The government should not be sending money to people who don’t pay income taxes. This won’t stimulate the economy, and the only thing happening here is an attempt at a “political stimulus”, attempting to shore up the miserable approval ratings of this Congress.

I just got off the House floor, after debating the Fiscal Stimulus Package.  I think you will find my objections enlightening.  Click below to view the video.

Club for Growth has been keeping a running list of those Members of the House of Representatives who have sworn off pork until the process of earmarking is reformed.  I am proud to have my name on this list, and I hope to see more of my colleagues join me.

To see the full list, click here

I have been an outspoken critic of earmarks, and I frequently blog about some of the most egregious ones on this very blog, but this story by Sheryl Attkisson, from CBS Evening News perfectly articulates why earmarks are unfair and why the system must be reformed.

Attkisson highlights the relationship between Sen. Mary Landrieu (D-LA) and Randy Best, founder of the “Voyager” reading program.  In 2001, Sen. Landrieu earmarked $2 million of taxpayer funds to put the “Voyager reading program” in D.C. public schools. 

Mr. Best, the company’s founder, soon arranged a fundraiser for Sen. Landrieu, widely viewed as the most endangered Democratic Senator up for reelection this year, which raised roughly $30,000 for Landrieu’s reelection war chest.  These donations came from Best’s family, friends, and employees.

Attkisson notes that there are hundreds if not thousands of similar programs and companies out there offering the same or similar product which highlights the fact that this earmark was not competitively bid, and most earmarks are never competitively bid. 

To see the whole areticle by Attkisson. Click Here

This weekend, House Republicans are meeting for the annual members retreat. One of the major topics of discussion will be how to reclaim the reputation for fiscal responsibility.

The way I see it, House Republicans have two strong courses of action.

First, House Republicans should take the offensive and declare a moratorium on earmarks.  There would be some resistance from some Republicans Members of Congress who habitually request earmarks, but the this party is supposed to be that of fiscal restraint…the way the earmark system operates now is far from fiscally responsible.

Second, House Republican Leaders will have the opportunity to name an anti-earmark advocate to the vacancy on the House Appropriations Committee.  This would send a clear signal to the American people that Republicans are dedicated to fiscal responsibility.  Jeff Flake has made it known that he wants the spot, and has been a consistent and vocal opponent of the earmarking process.

I support both an earmark moratorium and Jeff Flake for the Appropriations seat.  However, what course of action to be taken is still in question.  The opportunity to take a stand has come and, if Republicans are truly dedicated to regaining their principles, this weekend will truly be one for the books.

As a dedicated fiscal conservative, I always favor allowing taxpayers to keep more of their own money. But the current stimulus package being discussed would entail an overall increase in transfer payment spending and would not effectively stimulate the economy.    

It is important to realize that the current crisis is a result of a capital and credit crisis, not a consumer spending one.  In order to tackle the crisis head on, I joined my colleagues in the RSC to introduce the Economic Growth Act of 2008.

The Economic Growth Act of 2008 is designed to provide growth-oriented, permanent incentives for economic activity across the board.  This package will result in sustained growth with long-term implications.  This will ensure that Washington takes a back seat to Main Street and job creators are empowered to do what they do best—create jobs.

This legislation contains four main provisions:

• Full, Immediate Expensing.  The bill would allow all businesses to immediately expense—or fully deduct on their tax returns—the costs of assets (including buildings) they purchase for their business in the year that they buy such assets (“Section 179” expensing).  Under current law, businesses can only take limited deductions in pieces, over several years.  By uncapping and accelerating the expensing, this provision would encourage the purchase of assets with which to grow a business.
• Significant Reduction in the Top Corporate Tax Rate.  The bill would immediately cut the top corporate income tax rate from 35% to 25%, aligning it with the average rate in the European Union.  By allowing businesses to keep more of the money they earn, this provision would encourage the expansion of businesses, the hiring of more workers, and an acceleration of investment, while making American companies more competitive internationally.
• End the Capital Gains Tax on Inflation.  The bill would index for inflation the cost basis used when calculating the capital gains tax on assets acquired before the end of 2008.  Under current law, the capital gains tax is based on the difference in the original purchase price of the asset and the sale price of the asset.  However, some of this difference, or “gain,” can be attributed to inflation.  By effectively reducing the amount of a gain that is taxable, this provision would encourage the movement of capital in 2008 and spur voluminous economic investment.
• Simplify the Capital Gains Rate Structure.  The bill would allow corporations to benefit from the 15% capital gains rate.  Under current law, individuals pay a top capital gains rate of 15%, but corporations are subject to a 35% top rate.  By encouraging corporations to sell unwanted assets, this provision would unleash funds and materials with which to create jobs and grow the economy.

The Congressional Budget Office (CBO) released its report on The Budget and Economic Outlook: Fiscal Years 2008 to 2018. I am off to a Budget Hearing Committee, and this is a lengthy report, but at first glance this is what stands out to me.

According to the report, the budget deficit fell in 2007 for the third year in a row.  It dropped from $316 billion in 2005 to $248 billion in 2006 to $163 billion in 2007.  Revenues in 2007 totaled $2.6 trillion (18% of the GDP), which is a 6.7% increase from the previous year. 

In 2008 the federal government is expecting a 3.4% increase in tax revenue despite the economic downturn.  So, if government spending could increase by 3.4% or less, the deficit will stay the same or go down.  Perish the thought! Who really believes this Congress will hold fast to fiscal responsibility and keep spending below 3.4%? Not me. In that scenario we would actually have a surplus, even in the current economic condition of this country. But back to reality…

The real question is, will Democrats remain within the 3.4% increase in spending?

I will be appearing LIVE tomorrow morning on CSPAN’s Washington Journal from 7:30-8:00am EST. to discuss the state of the economy and the economic stimulus proposals circulating in Congress.  

I hope you can tune in.

I just got off the air on CNBC Powerlunch.  I discussed my expectations for Chairman Bernancke’s testimony tomorrow at the budget hearing.  Click below to view the video.

As some of you may have heard, Rep. Wicker (R-MS) has been appointed to the U.S. Senate to fill the spot for recently retired Senator Trent Lott (R-MS).  This frees up a seat on the House Appropriations Committee.

I have long argued that the appropriations process is broken and needs to be reformed; in fact, I have taken a pledge to not request any new earmarks until we do so.  Now, we have a real chance at changing the earmark culture in residence in Washington, D.C. 

Rep. Jeff Flake (R-AZ), has submitted a petition to the House Republican leadership for consideration for the open seat on the panel, and I believe he would be an excellent candidate for the open seat.  Jeff Flake has long been a vocal and fearless advocate for reform of the earmark process, government spending, and oversight.

With this vote, the Republican Steering Committee has an opportunity to show that House Republicans are serious about fiscal responsibility.  I sincerely hope Mr. Flake will have the opportunity to send his message of open government and reform  to the American people.

It is time for a change. 

To make your voice heard visit Make it Flake