By Rep. Dave Camp (R-Mich.) - 09/20/10 10:55 PM EDT
There is a massive tax bomb about to go off in Washington, D.C. — one that will explode the tax bills of every family, senior and small business by $3.8 trillion during the next ten years. While the countdown clock is fast approaching zero, Democrats seem more interested in pointing fingers and playing politics than in solving this problem.
This tax bomb will raise marginal tax rates for individuals and families at every income level. It will force hard-working Americans to pay more than $200 billion more in taxes next year alone. On Jan. 1, the child tax credit will immediately be cut in half, from $1,000 to $500 per child, costing 31 million families an average of $1,033 in higher taxes next year. The marriage penalties in the standard deduction and the 15 percent bracket will return, costing 35 million married couples an average of $595 in higher taxes in 2011. And the 10 percent bracket will be eliminated, raising the lowest tax rate to 15 percent and costing 88 million taxpayers an average of $503 in higher taxes next year.
No one is spared from this tax hike. Millions of seniors who invest their retirement savings — including more than half of all seniors who pay income taxes — will see tax rates on capital gains and dividends rise significantly, imposing an average tax hit of $1,700. American investors will feel the impact not just in terms of the higher taxes paid on realized capital gains and dividends, but also in terms of depressed values of stocks held either directly, through mutual funds, or through IRAs and 401(K)s. These higher taxes will reduce the income so many seniors depend upon to supplement their Social Security benefits and to pay for housing, food, medical care and other monthly bills.
Worse yet, this tax hike will hit employers — especially small businesses — at a time when unemployment continues to hover close to 10 percent. Seventy-five percent of small businesses and more than half of business income taxes are paid at the individual income level. Democrats in Congress purport they want to focus on the economy and job creation, but their track record says otherwise.
Also looming ominously on the horizon is the reinstatement of the estate tax, which will jump from 0.0 percent to 55 percent next year. Small businesses and family farms, often asset-rich but cash-poor, will be hit particularly hard by the reinstatement of the death tax. Regrettably, jobs are lost when small businesses and family farms are sold off to pay estate taxes or when those businesses make decisions not to expand because of anticipated estate tax liabilities.
The Obama administration has already slapped taxpayers with $680 billion in higher taxes during these past two years; $316 billion of those will be collected through tax hikes that hit the middle-class families the president claims to be protecting. So far, Democrats have passed, and the president has signed into law, at least 14 violations of the president’s pledge that “no family making less than $250,000 a year will see any form of tax increase.”
Simply put, the threat of the Democrats’ looming tax hikes is already negatively affecting the ability of small businesses to hire new workers. Almost 15 million Americans are collecting an unemployment check instead of a paycheck. Back in Michigan and around the country, employers are telling us that a major impediment to hiring is the fear and uncertainty about future tax rates.
Instead of raising taxes and making it harder for small businesses to create jobs, we should cut non-security government spending to 2008 levels and freeze current tax rates for at least the next two years.
Rep. Camp is the ranking Republican on the Ways and Means Committee.