Our tax code is about the most unfair, complex, expensive to comply with and anti-competitive code we could create. One would think it could not get more burdensome and illogical. Unfortunately, it can.
Hundreds of billions of dollars in tax increases, affecting every single American, will take effect if Congress and the President do not act by the end of this year. President Obama would further complicate this by proposing relief for only one-year and for only some Americans. Questions are swirling about how the tax penalties for noncompliance with President Obama's Health Care Law will be imposed and the law's other costs. With the nation's record debt, the focus should be on tax reform that will generate investment, capital and jobs, not growth-killing tax increases.
Estimates indicate the average family pays nearly 40 percent of its income in local, state and federal taxes. In a family where both parents work, one is essentially working for the government. Now, Americans face potential federal tax increases, including increases in all income tax rates to as high as nearly 40 percent, increases on capital gains and dividends taxes, an Alternative Minimum Tax expansion and a death tax increase to as high as 55 percent.
President Obama's push for temporary tax relief for some, but not all, Americans would have broad effects. Temporary tax policy compounds problems by confronting American families and businesses with continued uncertainty. Uncertainty makes it impossible to make hiring, investing and personal plans for the future. This proposal stifles job creation and affects investments and savings:
According to the Joint Committee on Taxation, the latest White House tax proposals would raise taxes on nearly 1 million small business owners.
Fifty-three percentof all small business income reported on individual tax returns will be affected by this policy.
Twenty-five percentof employees of small businesses in the country will see their company's financial strength damaged, with the accompanying diminishment of their wages and benefits.
Economists agree that in a weak economy raising taxes is one of the worst things to do. President Obama agreed two years ago when the economy was growing at 3.1 percent. Now, he is calling for a tax increase when growth has slowed to just over 2 percent. In addition to the pending income tax increases, we face Health Care Law tax increases--including individual and employer mandate tax penalties, taxes on the manufacture of medical devices, an investment income surtax and a Medicare payroll tax increase among a laundry list of others. These taxes further the burden on Americans and add complexity to our tax law, which increases compliance costs.
Hopefully, all Americans are paying close attention to the impacts raising taxes on tens of thousands of job-creating businesses will have on our economy. The Congressional Budget Office projects that the federal gross debt totals nearly 99 percentof gross domestic product. This growing debt reduces national savings, and leads to higher interest rates, more borrowing from abroad and less domestic investment. Stifling private sector growth through tax increases will make matters worse.
Over the last few years, we have seen more spending, more debt, more taxes and more regulations from the federal government. Recent administration tax proposals do not simplify the tax code; they make it more unpredictable. I have been working for years, through my committee assignments, the president's Fiscal Commission and the Gang of Six,to craft solutions for comprehensive tax reformand welcome continued engagement from Idahoans. We must curtail out-of-control deficit spending and institute comprehensive long-term tax and fiscal reform to get out of this financial hole.