How the Largest Tax Increase in History Will Impact You if Washington Fails to Take Action

Statement

If Washington is serious about growing the economy and fostering a job creation, we must take immediate action that will steer us back on track toward prosperity.

In July, the nation's largest association of small businesses, the National Federation of Independent Business (NFIB), did a study that showed optimism among small business owners has never been this low for such an extended period of time. An NFIB economist remarked that small business owners "are pretty pessimistic about the way things look, and they're not about to spend their capital on hiring or on expansion until they're more certain about what the future looks like."

Some of the uncertainty relates to the condition of our economy, but much of it is attributable to the agenda set in Washington by Speaker Pelosi and President Obama. Rather than focusing on economic recovery and job creation, President Obama and Democrats in Congress have tried to put government in charge of our health care and the financial markets, supported costly cap and trade legislation, spent the taxpayers' money at record levels, and failed to prevent the largest tax increase in American history. Rather than creating jobs, businesses are bracing for the blow dealt by Democrats in the 111th Congress.

But the good news is that there are a number of things Congress can and should do to fix it.

The first immediate step toward restoring confidence in our economy is to extend current tax levels across the board. If this is not done quickly, Americans will see over $200 billion in tax increases just in 2011. In the midst of a recession, families, seniors and small businesses cannot afford to see even more of their paychecks taken away for unwise federal spending.

However, instead of addressing this major issue affecting our economy, Speaker Pelosi decided to call it quits a week early without stopping the $3.8 trillion tax increase facing nearly every taxpayer on January 1, 2011.

Kentuckians deserve certainty when it comes to taxes in order to make informed decisions for their families, retirement and business development. Do not let Washington rhetoric mislead you; if Congress does not act quickly, this will be the largest tax increase in history on hardworking families, seniors and small businesses.

Effect on Families, Individuals and Seniors

Without action by Congress, in less than seventy days, the IRS will begin taking a bigger bite out of all of our paychecks. The child tax credit will be cut in half. This provision alone would cost the average family of four an additional $1000 a year. The marriage penalty will be reinstated, costing about 35 million married couples an average of $595 in new taxes next year.

Senior citizens will also feel the burden of these crushing tax increases. Increases in capital gains and dividends tax rates will cost senior citizens with retirement investment income an average of $1,700 or more in 2011. These increases will cut out vital income that seniors depend on to pay for housing, food and medical needs.

The basic income tax rates that affect the money withheld from everyone's paycheck will also increase on January 1st without action from Congress. Both middle class families and seniors will be penalized as the lowest tax bracket increases from ten to fifteen percent. For 88 million middle class taxpayers, this change alone could mean more than $500 in additional taxes next year.

Effect on Job Creators

Small businesses have been responsible for nearly 70 percent of new jobs created in recent years. For a variety of reasons, many of America's small businesses file their taxes as individuals. Because of the way they file their taxes, they too are impacted by the changes in the tax rates. This means many of these proven job creators will end up sending more money to Washington that could otherwise be used for expansion or job creation.

January 1st also marks the return of the devastating death tax which could cost the next generation more than half of a small business' value after the death of the owner. In many cases when this double tax is effective, the business must be liquidated to pay the hefty tax rather than being able to preserve the jobs. Death should not be a taxable event. The Joint Committee on Taxation agrees that the death tax has "broad economic effects." In fact, one study has found that the death tax is responsible for lowering overall employment by 1.5 million jobs over the previous ten years.

The Heritage Foundation's Center for Data Analysis estimates that overall these tax hikes could cost our country an estimated average of 693,000 jobs per year. When one in ten of our neighbors across the Commonwealth is unemployed our economy cannot afford to send more money from every sector to support Washington's reckless spending habit.

The time to act is now. We cannot sit idly on the sidelines and watch as these tax increases take effect on January 1, 2011. America needs a new direction in Washington that will put our nation on track towards fiscal responsibility, economic growth and accountable and transparent governing. Congress should act to stop this looming tax increase from cutting our nation's economic recovery off at the knees.

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