September 15, 2010 | WebMemo on Obama Tax Hikes
The 2001 and 2003 tax relief packages are set to expire at the end of this year. If these packages are allowed to expire, on January 1, 2011, taxes will go up automatically for American taxpayers—without a single piece of legislation ever crossing the President’s desk.
President Obama’s plan, which is nearly identical to the blueprint adopted by Congress earlier this year, is to hike taxes on families, small businesses, and investors earning over $250,000 while preserving the tax relief for families earning less than that threshold. Although the President has offered his plan for more than two years now and the expiration date of current law has been known for years, there still is no pending legislation in Congress to prevent tax hikes for any taxpayers. With the expiration of the tax relief fast approaching, the absence of actual legislation increases the likelihood that Congress will do nothing and simply allow all the tax relief to expire.
Senate Minority Leader Mitch McConnell (R–KY) and Senator Charles Grassley (R–IA) have stepped into the breach and offered the Tax Hike Prevention Act, a plan that would, as its name says, prevent these forthcoming tax hikes for all taxpayers—permanently. Their plan is the right move for the economy because it would give families, small businesses, seniors, and investors the certainty and right policies needed to prevent a steep tax hike that would cause Americans to cut back on work and investing as the economy continues to struggle.
McConnell–Grassley Plan Good for Economy
The McConnell–Grassley plan makes permanent all the 2001 and 2003 tax relief. Below is a list of the most important provisions that the plan makes permanent and what the economic impact would be if Congress allows them to expire.
Keep Tax Rates Where They Are
Raising taxes during a struggling economy makes no sense. Doing so now would slow this lagging recovery even further. Raising taxes on investment, work, and savings would diminish all three—hardly a recipe for creating jobs.
The McConnell–Grassley plan recognizes that preventing steep tax rates permanently is good policy any time but especially in a struggling recovery.
Curtis S. Dubay is a Senior Analyst in Tax Policy in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
See Rea Hederman, Jr., and Patrick Tyrrell, “Obama Tax Hikes: Dividend Tax Increase Hurts Seniors and the Economy,” Heritage Foundation Backgrounder No. 2460, September 10, 2010, at http://www.heritage.org/Research/Reports/2010/09/Obama-Tax-Hikes-Dividend-Tax-Increase-Hurts-Seniors-and-the-Economy.
See Curtis Dubay, “The Economic Case Against the Death Tax,” Heritage Foundation Backgrounder No. 2440, July 20, 2010, at http://www.heritage.org/Research/Reports/2010/07/The-Economic-Case-Against-the-Death-Tax.
See J. D. Foster, “Obama Tax Hikes Defended by Myths and Straw Men,” Heritage Foundation Backgrounder No. 2454, August 26 2010, at http://www.heritage.org/Research/Reports/2010/08/Obama-Tax-Hikes-Defended-by-Myths-and-Straw-Men.