OTR Interviews

Is Reforming the Tax Code Key to Fixing the Economy?

Rep. Paul Ryan on why tax code reform is the key to producing jobs


This is a rush transcript from "On the Record," September 13, 2011. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: right now, our economy. It's a mess! But you already knew that. Any ideas what to do? Well, Wisconsin congressman Paul Ryan has an idea. Wisconsin congressman Paul Ryan, chairman of the House Budget Committee, is here.

Nice to see you, sir. And you have an idea about the tax code.

REP. PAUL RYAN, R-WIS., BUDGET COMMITTEE CHAIRMAN: Absolutely. We've been proposing this all along. As I mentioned before, we've been passing a lot of reforms and ideas from the House to create jobs that are stacking up in the Senate. And one of those things we proposed in our budget was to lower our tax rates on businesses, individuals to no higher than 25 percent, but to pay for that by closing loopholes.

Get rid of the loopholes, lower the tax rates to make us more competitive, so we don't tax our job creators more than our foreign competitors are taxing their companies. That gives us competitiveness, but more importantly, gives businesses certainty, certainty so they know what tax rates are going to be not just today but in the future, so they have more confidence to hire and invest in the future.

VAN SUSTEREN: All right, tax is enormously complicated, the whole issue, and we got a sneak peek. You have a video coming out that shows what you want. Tell me what this video -- and when are you going to release it and why are you doing this?

RYAN: We're releasing it tomorrow morning. Basically, it's a complicated issue. Our tax code is extremely complicated. It is so complicated that it is one of the reasons why our economy is not growing well right now. And we do what I call crony capitalism. We pick winners and losers in the tax code through loopholes. Some businesses don't pay a lot of taxes, make good money because they use loopholes. Other businesses play by the rules, pay really high tax rates.

And right now, we tax our businesses at much higher tax rates than our foreign competitors tax theirs, and we're losing in global competition. If we want to have a good economy, prosperous America, we need to be competitive on our tax policies. And right now, we're taxing American businesses at rates much higher than our foreign competitors are taxing theirs.

Get rid of the loopholes. Lower tax rates on everybody. Stop picking winners and losers in Washington, and we can start jobs created in this country.

I just did a town hall meeting in Racine County just before I came over here, over the phone, talked to four small business owners who are telling me certainty is the problem. I did all these roundtables with manufacturers in Wisconsin in August. Uncertainty is plaguing them. The key question they ask me is, What's the government going to do to me next? What are my taxes going to be in 2013? What are these new regulations going to do to me?

And those are the things that are not being addressed in this new jobs bill the president's sending us, but those are the things that our job creators are telling us they need that kind of certainty so they can actually start planning and investing and having confidence.

VAN SUSTEREN: All right, now, the -- one of the sort of the dirty little secrets is that these loopholes, earmarks, or whatever -- is that those -- I mean, they favor somebody.

RYAN: Absolutely.

VAN SUSTEREN: And they're there because somebody got to his congressman or senator...


VAN SUSTEREN: ... or senator, and got there. And so it -- I mean, there's -- it's all been sort of this -- it's cronyism.

RYAN: I call it crony capitalism.


RYAN: And Republicans and Democrats alike, all of us -- both parties are responsible for this. But what it has done now is it has made our code so complicated, so unfair, and our tax rates so much higher as a result of it.

VAN SUSTEREN: All right, one thing that I read that you said -- you said over the last decade, on average, at least one change to the tax code is made every day.

RYAN: Yes.

VAN SUSTEREN: How can that be? I mean, how can that possibly be?

RYAN: Because Congress passes lots of complicated tax laws, gives a lot of direction to the IRS, who fills up all these tax regulations. And so you have so many new tax enforcement regulations coming out that it is extremely difficult to navigate this tax code.

And the other thing is, in the name of interests or whatever, Congress is putting special exceptions in the tax code for certain activities and certain industries. And what that ends up doing is it helps incumbent businesses protect their market share. It erects a barrier to entry against other would-be smaller businesses and in the -- at the same time, in order to raise the revenue for the government, you have to have higher tax rates as a result of it.

So we're saying get rid of the loopholes, lower everybody's tax rates so that the determiner of whether a business fails or succeeds is not some congressman putting a loophole in but whether or not they're good or not, whether or not they have a good product, whether or not they're innovative or not. That's the kind of thing that we need to spur growth and economic ingenuity in this country.

VAN SUSTEREN: All right, there hasn't been much of an overall, I think, since 1986.

RYAN: It's been a while.

VAN SUSTEREN: Been a while. And it seems that everyone -- everyone agrees that it is so complex. Everyone agrees it's a mess. Everyone agrees that it shows favoritism to certain people. Everyone agrees that it hurts business. So why -- and I can understand there could be debate over, you know, what we actually do or whether we do a "fair tax," flat tax, whatever. But why -- why are we even at this position? I mean, this time -- and what has taken Congress so long? And what is going to take Congress to actually do something? Because it is a problem.

RYAN: And this is the point I keep trying to make, is this should -- this has bipartisan support. There are Democrats, along with the Republicans. who agree with these things we're saying right now.

VAN SUSTEREN: Yes, Bill Nelson, the Democrat from Florida...

RYAN: Bill Nelson...

VAN SUSTEREN: ... said something today.

RYAN: The President's fiscal commission, Erskine Bowles, the chairman of that, proposed basically doing just this. And so this is what I think we have a shot at working together on a bipartisan basis to fix this situation because both Democrats and Republicans acknowledge this is a problem...

VAN SUSTEREN: Well, what's the...

RYAN: ... and it ought to be fixed.

VAN SUSTEREN: What's the resistance you get? When you talk about it, what's the first thing you hear that -- what's pushback?

RYAN: The industries and the businesses that have their carve-outs in the tax code really care a lot about those carve-outs and fight really hard for these things. And the general public that generally wants a better, fairer, simpler tax system does not fight as fervently for that kind of sense of fairness. So it's really a sense of concentrated special interests at the expense of sort of the greater good. And that's what we have to overcome.

And we've got a good bipartisan consensus that this is not the way we should be doing things. And we can get job creation. The fear I have with the president's economic policies (INAUDIBLE) promises all these new tax increases, another stimulus spending, which is basically the last stimulus bill but divided by two, about half as much, with new tax increases on top.

So it's missing the boat on passing ideas that have proven to work and it's repeating the mistakes of moving ideas that have already proven to fail. And this is an area where a lot of Democrats agree, so I would love to see if we can get the president focused on these kinds of ideas because a lot of people in his party agree with us that this would be good for job growth.

VAN SUSTEREN: All right, I don't -- I didn't bring you here to defend the president's jobs bill, and I bet that's not going to happen. I am curious about one thing. One thing that I read is that to fund this $450 billion plan, that $400 billion will be to do away with charitable deductions for certain people who have a certain income.

Explain to me -- I mean, most people give to charity to help poor people. I mean, there's the occasional person who gives a piece of art to the museum, but usually, it's soup kitchens, it's hospitals, it's schools, it's cancer units at hospitals. Why are -- why are we trying to -- I mean, we will discourage people from giving if we take away that advantage. But then, of course, that cuts against your thing to get rid of the loopholes.

RYAN: But of all the loopholes and deductions that are out there, this is the fairest of them all, in my personal opinion. This is the most broad-based. This isn't Congress trying to prop up one industry, like say ethanol or solar panels. This is saying, If you donate to your charity and your community, you can write off that donation.

Taking away that to pay for stimulus spending that has already proven to fail -- it's two bad ideas. So number one, more borrowing and spending today. We've already proven that these rebates and these other things aren't working. Didn't work when Bush tried them. Didn't work when President Obama tried them. And then to do it by taking away the source of capital that go to charities at a time when we need our charities to step up because we have tough economic times -- that, to me -- I don't understand why they would propose that.

So permanent tax increases to pay for a temporary spending binge is not good economics. And whenever we've done these things in the past, they haven't created jobs. That's why people like me are saying, Here's an area where most of us agree. We have a tax system that's making us less competitive, that's hurting jobs and injecting tons of uncertainty into the corporations and businesses of America. Let's deal with that.

And that's why we're trying to give emphasis to these ideas. We passed a lot of ideas in the House to create jobs -- energy policy, regulatory reform. They're just stacking up in the Senate, where they haven't been acted on. This is one of those ideas where we would like to see an effort because we do hear Democrats say that they want to do this.

VAN SUSTEREN: All right (INAUDIBLE) should have a bonfire on the Mall, burn the tax code and start over.

RYAN: I'll bring...

VAN SUSTEREN: I mean, I...

RYAN: I'll bring s'mores.


VAN SUSTEREN: Because, I mean, something just -- I mean, I -- I don't -- I bet there isn't a member of Congress who does his or own tax return. I mean, it's so complicated.

RYAN: Probably not. And I've been on the Ways and Means Committee for a long time now, for over a decade. And this is the committee that did a lot of this. And I just have to tell you, Greta, what the tax code is being used for today is to try and micromanage and social engineer economic activity instead of just raising a proper amount of revenue for the government in the most efficient way possible so we can maximize economic growth and remove barriers from businesses that want to get started, that want to invest.

You know, all the small business people I met with throughout the month of August at home and in Wisconsin are telling me, I have no idea what my tax rates are going to be in 2013. So why on earth would I invest and take a risk when I don't even know what it's going to cost me in just a year-and-a-half time? Those are the kinds of things that are putting a chilling effect on job creation, and more borrowing and spending today in whatever you want to call a stimulus package, I just don't think -- I think it's a poor substitute for actually fixing these broken problems.

VAN SUSTEREN: All right, well, the video will be posted tomorrow on your website, I'm sure, so people can see your explanation of it. Thank you, Congressman.

RYAN: Thank you.