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This is a rush transcript from "On the Record," December 11, 2012. This copy may not be in its final form and may be updated.
GRETA VAN SUSTEREN, FOX NEWS HOST: Senator Rand Paul says let Democrats dig their own grave. He says let Democrats raise taxes on everybody. Senator Paul is telling Republican colleagues senator to vote present on a deal, allowing Democrats to push through their tax hikes. Why would Senator Rand Paul want to take that tactic? The senator joins us. Good evening, sir.
SEN. RAND PAUL, R-KY: Good evening, Greta.
VAN SUSTEREN: Explain to me why you think that's a good tactic.
PAUL: I think what we should do first of all is put forward what we are for. So if they are in the House, the House leadership should put something forward that extends the Bush tax cuts forever and has significant spending cuts. And I think they passed that.
The Democrats won't accept that and were unwilling to stay by our position. Then I would say let them pass a tax increase on the upper increase folks, but let it do it with their votes, not our votes. Republicans vote present in the House. Democrats can pass the tack increase with only democrat votes and then the Democrats are the parties of high taxes and the Republicans are the party of lower taxes. And I think that's the way it should be.
VAN SUSTEREN: Well, House is not going to go for that. Do you agree? The House isn't going to vote for the Democrats deal.
PAUL: I'm not saying vote for the bill to raise taxes, I'm saying that we vote first on a Bill that says we will not raise the taxes, and that is our true position. That's what we stand for. We think that you stimulate the economy by leaving more money in the economy, actually lowering taxes. That's our philosophy. That's who we are as Republican.
So I would pass that. The House has passed that previously. I would pass that again now, and that if we cannot get the president to negotiate from that position, and if they are going give in, don't give in by splitting the baby. Give in by voting present, let the Democrats pass an increase in the upper tax brackets, comes over to the Senate, Republicans vote no, and it becomes a Democrat tax increase but not a Republican/Democrat tax increase, which I think is a mistake for the Republicans.
VAN SUSTEREN: Republican Senator Ron Johnson from Wisconsin says it's not the end of the world if we go over the fiscal cliff, although there are some economists who say it could thrust us back into recession. What do you think will happen if we go over the fiscal cliff?
PAUL: I don't think there is a cliff in the sense that all of a sudden tomorrow something dramatic happens. I think stock markets sometimes react quickly, but for the most part, whether it's going to be a recession or not is a much more long, drawn-out process.
But I would say that it's not a good idea to raise anyone taxes, and that the marketplace does not differentiate whether you take the money from rich people, poor people, or middle class. The marketplace says if you are going to take $800 billion, are you taking it out of the private sector, the productive sector, and are you going to give it to the nonproductive sector in Washington, basically the sector of people who are always messing up things in the marketplace? Are you going to do that? If you are going to do that, it's a bad idea no matter whether it's rich people, middle class, or poor. It doesn't matter. If you take money out of the private sector, it's a bad idea.
VAN SUSTEREN: Well, it's not as though the taxes around going to go up on the wealthiest Americans come January 1. Maybe not to the extent the Democrats want in the income tax bracket, but certainly it's going to go up. They will pay more in Medicare under the Obama healthcare. They will pay more on their investment income, 3.8 percent if you are a high earner. So there will be additional taxes. I realize you will pay for other things besides. Taxes are going to go up for the wealthiest Americans on January 1, just not as much as Democrats want. Would you agree?
PAUL: Yes. And here's the question. How much is enough? When will they have enough? The thing is most people in a lot of these high tax states are already pagan excessive amount of their income. Look at companies now trying to get away from the tax collectors. Look at Google taking their money to Bermuda. Look at all the corporations who can't stand to pay 35 percent income tax in America that won't bring their money home. Money goes where it is welcome.
VAN SUSTEREN: Let me ask you about Google. Google managed to do tax avoidance, which is not illegal, by putting money in Bermuda and I think they saved $2 billion in tax avoid dance. What efforts are being done by the Democrats or the Republicans to discourage that type of lawful avoidance, but nonetheless a huge amount of money for a very wealthy company?
PAUL: I'm not against them doing that. In fact, I compliment them because that money stayed in the private marketplace. But I would say to folks who are doing that, don't come to Washington and agitate for higher taxes if you are avoiding taxes. By all means, continue to legally avoid as many taxes as you can because that keeps money in the private marketplace and helps to create jobs. I'm all for that. But don't at the same time come agitate for higher taxes, because we need lower taxes.
Countries around the world are finding out that this is a mistake. England raised their upper rate, and they got lower tax revenue. When the Bush tax cuts came into play we lowered tax rates and we got more revenue. So the main reason I'm opposed to what the president is doing is it's not going to work, and it may give us less revenue and less economic growth. So I'm completely opposed to the president. I was before the election and I still am after the election.
VAN SUSTEREN: If you look at Google, you say you're not opposed to that. But if you take, let's take the category, $250,000 to $3 million a year, that category, they don't hide their money, but they don't avoid taxes by using Bermuda because they don't have the structure to do that, number one. And number two is that they don't have all these lobbyists that create these payroll tax codes so that they can do that. So there's actually sort of a wealthy class that just is the billionaire class --
PAUL: That's true, and it isn't a fair tax code. The way you get a fair tax code is to lower rates and get rid of deductions so people don't have to avoid their taxes. But I will say in Google's defense, the corporate income tax in our country is 35 percent. In Canada it's 15 percent. In Bermuda I think it's nine percent. All across Europe it's in the 20s. Money goes to where it's welcome. Money is not welcome in the United States, or the president is trying to make it worse so money and people will flee. People will flee if you raise their taxes. They also won't work as hard and you'll be getting less revenue, not more, exactly the opposite of what the president wants.
VAN SUSTEREN: For years I've been hearing tax code reform. That's all I've been hearing, and maybe we'll get it sometime, but I'm not holding my breath. Senator, thank you, sir.
PAUL: Thank you.