Current tax rates are set to expire at the end of the year, resulting in the largest tax increase in American history. This economic calamity, known as "Taxmegeddon" or the "Fiscal Cliff," could not come at a worse time for taxpayers.
The latest economic data confirms unacceptably low levels of growth, and the national unemployment rate has remained above 8 percent for 42 months in a row. The non-partisan Congressional Budget Office found failing to prevent this fiscal cliff would result in a recession in early 2013.
The pending tax increase sets up a simple choice for Congress; remove the threat of the fiscal cliff by extending current tax rates for all Americans while working on comprehensive tax reform, or allow tax increases to cripple our economy at the time we can least afford it. Put another way, do you believe the economy grows by money being in your hands, or with the government?
I have joined a bipartisan majority of my colleagues in voting to extend the current tax rates for another year to avert further financial strain. Importantly, the House voted to extend rates for all Americans.
In contrast, Democrats in the Senate and the President want to raise taxes on income above $250,000, which might make for good political fodder, but it does not make good policy. Their plan would raise taxes on nearly one million small business owners who pay business taxes at the individual rates, and will cost more than 700,000 jobs according to a report by Ernst and Young.
The Democrat plan also would allow the estate tax, also known as the Death Tax, to revert back to 55 percent and a $1 million exception which would be disastrous to Nebraska farms, ranches, and small businesses. I visited a manufacturing plant in the Third District with less than forty employees, and they told me this increase in the estate tax would devastate their business.
While extending the rates for one year is a temporary measure to avoid immediate harm to Nebraskans and the national economy, we need comprehensive tax reform which encourages economic growth and job creation through a simpler, flatter, and more competitive code. This form of comprehensive tax reform when combined with spending cuts would create an estimated one million new American jobs in the first year.
The House also recently passed legislation to provide an expedited process for tax reform next year. This expedited process would remove several of the hurdles to tax reform and help ensure Congress can focus on passing a long term solution rather than more temporary measures. As a member of the Committee on Ways and Means, which is charged with rewriting the tax code, I look forward to this process.
During the month of August, I will be traveling throughout the Third District meeting with Nebraskans about the need to reform our outdated tax code and to get your ideas for reform. I will host tax reform roundtables in Sidney on August 21 and in Wayne on August 23. Please contact my office for more information or if you are interested in attending one of the roundtables.
The House of Representatives has acted and it is my hope the President and Senate will support our bipartisan efforts to spare all Americans from higher taxes next year and set the stage for tax reform to encourage long-term economic growth. Compared with the alternative, this one is an easy choice.