As December approaches, an economic obstacle that imperils Americans is coming into view. The country faces what many have called "Taxmageddon," a $4.3 trillion tax hike over the next decade that would hammer an already ailing economy.
This massive tax increase would hit all taxpayers. For starters, tax rates in five of the six income tax brackets would increase anywhere from three to five percent, meaning that low-, middle- and high-income earners all would face a higher tax liability. Seniors living on modest retirement means, average middle class households, small businesses filing as individuals; you name it, Taxmageddon affects us all.
Taxmageddon includes other tax increases that would harm taxpayers young and old alike. For instance, failure to extend current tax policy would cut the child tax credit in half, from $2,000 to $1,000 for joint filers and $1,000 to $500 for single parents. Seniors earning qualified dividend income that is otherwise tax-exempt today would have to pay a fifteen percent tax rate on those earnings starting next year.
Taken together, these tax increases would cause a family of four earning $50,000 a year to pay almost $2,200 in higher taxes, a single mom making $36,000 to pay more than $1,100 in additional taxes, and a married senior couple with income of $40,000 to pay nearly $1,700 in new taxes.
The increased tax burden on individual taxpayers and small businesses is worrisome, but the overall impact of Taxmageddon on the job market and growth could be devastating to our still sluggish economy. According to a recent report from Ernst & Young, allowing current tax policies to expire would eliminate more than 700,000 jobs and cost the economy $200 billion of output in the long run. Kentucky would account for almost 10,000 of the eliminated jobs and $2.2 billion of these losses.
We cannot afford the consequences of across-the-board tax increases amid the backdrop of eight percent unemployment and already stalled economic growth. That is why House Republicans have introduced the Job Protection and Recession Prevention Act of 2012 (H.R. 8), a one-year extension of current tax rates to prevent the $300 billion tax hike that will take place in 2013 without action.
The bill extends only for one year to allow appropriate time for a badly needed overhaul of our tax code.
The U.S. tax code is excessively complicated and puts us at a competitive disadvantage. Fixing these deficiencies will take more than simple tax extensions, which is why in addition to H.R. 8 we have proposed the Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012 (H.R. 6169).
This legislation sets forth our principles on comprehensive tax reform and then provides for expedited consideration of such a package next year, compelling Congress to address the issue without procedural delays. Our economy needs a simpler and broader tax system free of special preferences, and adopting H.R. 6169 would ensure that we get to work on making the needed changes.
Extending current tax rates for one year is a necessary step to keep the heat off of our families and small businesses and give Congress the time needed to move forward on tax reform. True tax reform is critical to the long-term success of the American economy.