Sen. Paul: We should stimulate economy by lowering taxes

Kentucky senator on fiscal cliff, spending cuts

This is a rush transcript from "Your World," November 27, 2012. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST OF "YOUR WORLD": Union members now descending on Capitol Hill for an all-out push for more spending, not less spending.

The leaders do not really want lawmakers to touch entitlements at all, but they do want lawmakers to hike taxes on the rich, reason enough why Senator Rand Paul says his Republican colleagues better grow a backbone and soon.

Senator, good to have you.

(LAUGHTER)

CAVUTO: That was something I raised with your colleague John McCain. I don't see that. I know elections have consequences. You could make a point about raising taxes on the rich and the president won that argument. You could argue to what degree, though, but it seems like almost on every single item Republicans are only negotiating on how much to raise revenues.

SEN. RAND PAUL, R-KY.: Well, I made a commitment to the voters of Kentucky that I didn't think raising taxes was a good idea, that we were spending too much and that we should cut spending. I am still perplexed by this whole idea that a fiscal cliff occurs when you sequester or cut federal spending. I thought that was a good thing. I thought we needed to cut more spending, so I don't even understand why cutting spending or sequestering spending is a fiscal cliff.

The other half of the equation on taxes, I don't think raising taxes is good and everybody seems to agree. Let's not raise taxes on everyone. That would be Taxmageddon. But then what about let's just raise taxes on 40 percent of the economy?

That is what we are talking about. It is only 1 percent of the people, but it's 40 percent of the nation's income.

(CROSSTALK)

CAVUTO: So, what do you think of your colleagues who either do not see that or they are scared stiff after the election and they're reading more into it than maybe is the case but they seem to be just folding like cheap suits?

PAUL: I think they should be reminded they took a pledge to the voters in their state. They campaigned on it and they said they were not raising taxes and they said that that is what we believe in. We believe in stimulating the economy by leaving more money in the economy, more money in the states, more money in the private sector, and that is what our philosophy is.

(CROSSTALK)

CAVUTO: So, you do not buy these polls that say a majority of Americans are for sticking it to the rich?

PAUL: Yes. I think the thing is, is that if you talk to people and you say, do you understand that your boss employs you, and your boss may be richer than you, but if you tax your boss more, that that may be less jobs, that may not be your job, but it may be the person trying to get a job who that business doesn't expand because their taxes increase?

I think people do get that. The president did run on a class warfare, sort of class envy type of argument. But he only got about 40 percent of the vote in my state, so my state rejected his message.

CAVUTO: Senator, the way things stands now with some of the proposals I have heard -- and Senator John McCain might be right and there could be a deal in the final hour, a way to avoid this mess -- he's kind of split on whether that happens or not, but that most of the stuff I see are concessions on the part of Republicans on revenues and not just avoiding a rate hike, but they might cede on limiting deductions that might end up costing the rich even more than a rate hike.

How do you feel about that?

PAUL: Well, see, I am kind of out there on a different limb.

I think that we should stimulate the economy by lowering taxes. So I am not even that excited about revenue-neutral. I will tolerate revenue- neutral which means lowering rates and giving up deductions, simplifying the tax code. I would tolerate that, but I'm not jumping up-and-down excited about it because that will not do anything to stimulate the economy.

CAVUTO: But if you limit the deductions, if you limit the deductions, you leave the rates alone, a lot of Republicans are saying, just leave the rates alone, we will go with the limiting deductions. But there's a number of math models, as you know, Senator, that says you actually could leave the rich paying a lot more and others paying a lot more in taxes than if you had just raised their rates.

PAUL: It is harmful to the economy whether you raise rates or limit deductions.

It is revenue being taken from the productive sector, the private sector, and given to the non-productive sector, to government. So whether it is closing deductions or raising rates, they are both harmful to the economy, they are both a mistake.

If you look back at our history, every time we have lowered rates, we have actually brought in more tax revenue. What we need is economic growth. You do not have to raise rates. You have to grow the economy. We are growing at 1 percent. If we were growing at 4 percent, we wouldn't have this so-called fiscal cliff.

CAVUTO: What do you think of Grover Norquist and all the heat he's taking?

PAUL: I think Grover Norquist has done a great service to the country in getting so many people to take a pledge because there is some pressure on these people now to go back on their word.

And I think there should be pressure because I think it is the wrong thing to do. So I think Grover Norquist and Americans for Tax Reform, I worked with him for 15 years before I was elected getting state legislators to sign this pledge, so I'm a huge fan of the pledge. And I think it does hold people's feet to the fire and they have essentially signed their signature saying they're not going to raise taxes, so if they go back on their word I think they will suffer the repercussions in their next election.

CAVUTO: All right, Senator, good seeing you again. Thank you.

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