Tax Fight:GOP Won’t Back Down

As we enter the final stretch before the November midterm elections, all eyes have gravitated to the fight over the looming federal tax increases. President Obama and Speaker Nancy Pelosi want to keep the current rates on income, capital gains and dividends in place only for those who happen to fit their description of “middle class.” In this moment of economic distress, will they get their way even though a bipartisan majority of the House disagrees with them? Or will present tax rates be extended for all American taxpayers—and most importantly for small businesses and investors, the nation’s job creators?

Republicans unequivocally oppose any impending tax increase. House Republicans have called on Speaker Pelosi to allow the House to vote on legislation that would freeze all tax rates for the next two years. It’s a vote the taxpayers of this country deserve before November.

Lest there be any doubt why we are so determined to fight—instead of going quietly and giving President Obama his way before Congress bolts for the elections—the GOP has two primary motivations. The first concerns the pain that tax increases threaten to inflict on our economy over the short term. The second is to stop the slide under our current leadership towards becoming a stagnant European-style welfare state with limited individual opportunity and entrepreneurship.

Let’s begin with our immediate economic struggles. The glacial pace of private-sector job creation is a function of many factors, including irresponsible economic policies imposed by Washington.

Over the past year and a half, we’ve been reminded that incentives—or, more to the point, disincentives—matter. Health-care costs matter. Energy costs matter. Regulations matter. And perhaps more important, tax rates matter.

Of those who have survived the roller-coaster ride of the past three years, our job creators seem content to sock away their cash rather than put it into investments and capital projects. Because they lack certainty and confidence in the tax and regulatory system, they sit on the sidelines.

All of this seems lost on the president. The same economic team that vowed last year’s stimulus would hold unemployment to 8% now says that it’s wise to raise taxes in the current climate. We must not take their word for it.

As the failed stimulus illustrates, a government redistributing hundreds of billions of dollars—much of it to achieve social and political goals—is far worse at allocating capital and creating jobs than private industry. This year’s battle over taxes is thus a fight to allow businesses, taxpayers and private industry to keep more of their money so that they can provide real stimulus and lasting growth to the economy.

Yet it would be a mistake to view this tax increase in isolation. It must be seen in tandem with passage of the new health-care entitlement (enacted at a time when we should be exploring how to preserve and strengthen our current entitlement programs), the stimulus, and the 2,000-plus page labyrinth of new financial regulations. The reality is that this tax hike is just one more step along the way to creating an anticompetitive new norm in this country marked by bigger government, less growth and structurally higher taxes and unemployment.

The strategy to achieve the progressive left’s endgame is simple. First comes the provocative class warfare rhetoric. Second comes the vast assumption of government control over the economy. Third comes the growth of government spending and entitlements. And alas, higher taxes on our nation’s job creators and workers.

The only way out of this economic morass is through innovation, entrepreneurship and economic freedom. President Obama’s impending tax increase is not just a hike on a few “millionaires and billionaires,” as the White House tries to frame it. Roughly half of all small business income in America will face a higher rate, making this tax increase a direct assault on job creation and innovation. Coming from an administration heavy on officials with no business experience, this is a clear signal that the White House is determined to continue to spend recklessly and expand the entitlement net.

That’s why we’re not backing down.

Mr. Cantor (R., Va.) is the House Republican whip and a co-author of “Young Guns: A New Generation of Conservative Leaders,” just out by Threshold.