LIKE A GATHERING STORM
By Senator Mike Crapo
It's coming. In less than the time it takes to get a bachelor's degree, serve a military tour or complete high school, taxpayers earning $30,000 to $80,000 will see increases in their tax liability from $1,600 to $2,300. At the end of 2010, the tax relief enacted in 2001 and 2003 will expire, absent changes to current tax policy by Congress. The writing is on the wall - those tax cuts will very likely not be made permanent next year or the following. Some taxpayers are already starting to prepare for this financial disaster, much as they would for natural disasters. Planning for this includes visiting with personal and business tax and financial advisors on the upcoming changes to the U.S. tax code.
The tax increases coming in tax season 2011 mean a nearly 200 percent tax increase for families.
• Due, in part, to the reinstatement of the marriage penalty tax, 48 million married couples will see an average tax increase of $3,007.
• On average, 12 million single women with dependents will see their taxes go up $1,091.
• About 18 million seniors will see an average tax increase of $2,181.
• A whopping 27 million small business owners (the backbone of Idaho's economy) will see an average tax increase of $4,066.
If Congress continues on its current path, we can expect the following: The death tax will be fully reinstated (the maximum tax rate will revert from 45 percent in 2007-2009 to 55 percent). The maximum tax rates on dividends will increase from the current 15 percent to 39.6 percent. The rate on long term capital gains will jump from 15 to 20 percent. It's relevant to point out that almost 75 percent of those who benefit from the reduction in the top marginal tax rate are small business owners; not only will the tax rate increases hit this bedrock of our economy very hard in three short years, the uncertainty plays havoc today, compromising vital business expansion that results in investment in human capital (jobs), research and development.
Some in Congress want to see an increase in tax revenue; never mind that income tax revenue over the past five to seven years has gone against all prior predictions of catastrophic losses, actually bringing record tax revenue to the federal coffers. Some in Congress must believe that adding six million Americans to the income tax roles and removing eligibility for the child tax credit for low-income families with one or two children will result in increased tax revenues. Many economists disagree: absent the tax relief of 2001 and 2003, the 60 percent of federal income taxes currently paid by the top five percent of income earners would drop to 57 percent. I could be wrong, but I suspect that this tax burden shift won't be very popular with a large number of potential lower income American taxpayers.
Another critical point that must be made is this: Much of the tax relief that American families and businesses have experienced over the past five to seven years is in the areas of investment. Investment is, simply, planning for the future. When you tax this, you invoke a penalty on planning ahead. People - middle income Americans - will be penalized for saving and preparing, in their personal life and in their small businesses.
Come 2011, Americans, particularly families and small business owners, would do well to be prepared for this devastating hit to their hard-earned income. Get ready: The time is coming for the federal government to tell YOU the best way to spend even more of YOUR money - much more.
WORD COUNT: 599