Washington – “How much of my hard-earned money is Washington going to take next year?” It’s a question every single American family, business owner, and investor is asking themselves right now. Unfortunately, not one of them knows the answer.
On January 1, 2011, an economy-crippling armada of tax increases are scheduled to take effect. They include:
Personal Income Tax Hikes – The lowest-income taxpayers (the 10% bracket) get bumped up to 15%. Tax rates for the top four brackets will rise to 28%, 31%, 36%, and 39.6%. That’s less money your family will have to discuss around the dining room table.
Savings and Investment Tax Hikes – Individual capital gains tax rates will increase to 20% and 10% (from 15% and 5%). The double taxation of dividends will increase by as much as 164% (as they will no longer be taxed at the capital gains rate for individuals). Higher taxes on savings and investment will result in less of both – and a weaker job market.
The Marriage Penalty – Married couples will once again be penalized for their commitment with a higher tax burden relative to non-married couples with similar incomes.
The Death Tax – This macabre tax was eradicated this year, but next year it will return from the grave to confiscate up to 55% of a deceased person’s assets over $1 million. The Death Tax would be responsible for the demise of small businesses shortly after the demise of their owners (because the inheritors must sell the business to pay the tax).
Small Business Expensing – Small businesses can currently “expense” (much quicker than “depreciating”) certain purchases valued up to $250,000. That figure will plummet to just $25,000, meaning the primary job-creators in America will have a much tougher time expanding their businesses – leading to a weaker job market.
The Alternative Minimum Tax – The AMT, created in 1969 to cover a very small number of taxpayers, will ensnare upwards of 15 million taxpayers in 2011. Will you be hit? You won’t know for sure until you file your tax return.
All this sounds ominous enough, but it’s just the beginning. (A longer list of 2011 tax increases can be found here.) Our economy and job market would be much better off if Democrats joined with Republicans in stopping these job-killing tax hikes before they take effect. But they won’t do it.
Why not? Because Democrats want most of the 2011 tax hikes to go on as planned, but they don’t want to be held accountable.
“Democratic leaders are likely to punt the task of renewing Bush-era tax cuts until after the election. Voters in November’s midterms will thus be left without a clear idea of their future tax rates when they go to the polls.” (The Hill, 7/1/10)
Consumers and job-creators are reacting rationally to the Democrats’ reckless indecision (plus the prospect of more trillion dollar deficits, higher costs from ObamaCare, and the harmful impact of the Dodd-Frank permanent bailout bill) by putting their consumption and job creation on hold.
But the uncertainty about future tax burdens hasn’t just prompted less buying and hiring. Many families and businesses are preparing for next year’s massive tax increases by pulling as much of their 2011 income as possible into 2010. That spells bad news for the economy (and tax revenues) next year.
Of course, Democrats could easily avoid these job-killing tax hikes and this job-killing environment of uncertainty by addressing the issue today. The fact that they won’t suggests they care more about their own jobs than jobs for the American public.