Speech by Harry Gutman

As seen in the October 22nd, 2009 USU Statesman

Adam Ward
Staff Writer

“We are on an unsustainable fiscal path, and we must take steps to fix it when the time is appropriate,” said Harry “Hank” Gutman Wednesday at the Intermountain Accounting Seminar sponsored by the Jon M. Huntsman School of Business. The necessary steps, Gutman said, may inevitably involve raising taxes.

As the chief of staff for the Congressional Joint Committee on Taxation from 1991-93, Gutman was the primary nonpartisan adviser to the House Ways and Means and Senate Finance Committees concerning the technical, economic and revenue aspects of tax legislation. Gutman also served as Deputy Tax Legislative Counsel in the Treasury Department’s Office of Tax Policy.

Currently, Gutman heads the Federal Tax Legislative and Regulatory Services (LRS) group at Washington National Tax and is the director of the KPMG Tax Governance Institute (TGI). Under Gutman’s leadership, the LRS practice gives clients immediate notification about breaking developments in tax legislation or federal tax regulations, among other things.

Gutman began by reviewing the “American Recovery and Reinvestment Tax Act,” better known as the stimulus package that Congress and President Barack Obama passed earlier this year. Gutman pointed out that the $787 billion stimulus had to be paid for somehow and that bills such as the stimulus package will only add to the nation’s deficit, which is now at $1.4 trillion compared to $450 billion a year ago, according to The Budget and Economic Outlook from August of 2009.

The massive deficit causes huge problems for the United States economy, Gutman said. While the deficit is only 10 percent of the United States' gross domestic product (GDP), that number is still greater than all of the world’s GDP combined, with the exception of six countries. Gutman feels that American has dug a fiscal hole that it will not be able to get out of unless there are big changes.

Gutman said the only ways to get out of the hole are cutting back on spending or gaining a new revenue source. However, because of the way Congress works, he doubts any cutting will happen with the budget, so the only way to get out of the hole is to increase revenues, probably in the form of new taxes. Gutman knows that it isn’t what anybody wants but it is what must happen if the U.S. economy is going to get out of the fiscal hole that it’s in.

Gutman also warned that the timing of raising taxes is just as important as actually raising the taxes to get America out of the fiscal hole. There is a big scare about entitlement programs running out of money, such as Social Security or Medicare, Gutman said. However, Gutman said they won’t be a problem for 10 years, and nothing should be done to reform them until the economy is more stable and it is actually pertinent to reform the programs. Adding taxes now would hurt the recovering economy much more than it would help these programs, he said.

Gutman used a graph published by the Organization for Economic Co-Operation and Development, an international organization composed of 30 countries, about how much of the percentages of GDP goes to taxes. Gutman said the United States was down near the bottom – along with countries such as Mexico and South Korea – being taxed only a small amount. On the other hand, many citizens in European countries, such as Germany and Italy, are taxed nearly half their income.

There are many countries that are taxed much more yet still have a higher standard of living than the U.S. Gutman used the statistics to show that despite the public opinion that everyone is overtaxed, it is possible and could be beneficial to be taxed more. What’s more, Gutman said, is that higher taxes may be the only way to avert the next fiscal disaster the United States is likely to face as it recovers from the last one.
-adam.ward@aggiemail.usu.edu