If President Obama and congressional Democrats eventually follow through with their rhetoric about raising taxes on Americans earning more than $250,000 annually — or all taxpayers, if Obama vetoes any bill that doesn’t raise taxes on families making more than $250,000 — my advice is be careful for what you wish for. I certainly wouldn’t want to be a representative from a state with a high cost of living like California or New York and have to explain why taxes are being raised on families making more than $250,000.
In the coming months, we will have to decide what the tax code will look like for 2013. Based on what the president said, there’s a chance no decision will be made and Congress will be forced to answer why a single parent with one child will see his income tax go up by more than $1,100, nearly double their tax liability from the previous year. Or why a family of four will see a tax spike by more nearly $2,200, a five-fold increase.
If Obama has his way, families making more than $250,000 will see a federal tax rate of 40.8 percent on their salaries and 44.6 percent on their investments next year. More than half of all business income reported on individuals’ returns will be subjected to higher taxes — all while the economy is still struggling and tens of millions of people remain unemployed or underemployed. And because paying a higher tax bill means less money for those businesses to invest and hire, it shouldn’t come as a surprise that a new report by Ernst & Young indicates the president’s proposal could wind up costing more than 700,000 American jobs.
Alternatively, Congress can choose to extend the current rates for all Americans through the end of 2013. I believe this is the route that will have the most bipartisan support as we move forward. Every day more Democrats recognize the harm that could happen if taxes are raised. From Senate Budget Committee Chairman Kent Conrad (D-N.D.) to former Obama economic adviser Lawrence Summers, more and more of the president’s supporters are coming out against the idea of raising taxes. As part of the agreement, we should set forth a plan to determine what the tax code will look like for 2014 and beyond, including a timetable to guide comprehensive tax reform through regular order in the House and Senate next year.
Last week, the House passed a bill to stop the tax hike on American families and job creators. Crafted under the leadership of Ways and Means Committee Chairman Dave Camp (R-Mich.), the plan will extend the low-tax policies of 2001 and 2003 for another year, and patch the Alternative Minimum Tax for another two years, giving job creators and taxpayers some certainty as Congress works to address comprehensive tax reform.
The House also voted on a plan that outlines a set of principles and lays out a process to enact permanent tax reform in 2013. Cutting individual tax rates to 10 and 25 percent, Ways and Means Republicans believe we should also eliminate the AMT and move from an outdated world-wide corporate tax system to a more competitive territorial system. Currently, the United States has the highest corporate tax rate in the world. We must lower the rate and transition to a partial territorial system so world-wide companies look to the United States as a place to invest. Additionally, we need to encourage U.S. companies doing business abroad to invest their profits in the United States. As Camp has said, “It is time America’s tax code put the American economy first.”
Passing a plan that extends current low-tax policies and encourages enactment of meaningful tax reform puts our nation on a path toward sustained economic growth. It sends a strong message to families, employers and to the markets that we want to reform our current tax system so it promotes economic growth, not further debt, deficits and job losses. With growth comes more jobs and more opportunity. Now is the time to stop the tax hike, and for Congress to address our economic crisis.
Tiberi is a member of the House Ways and Means Committee.