Crapo Co-sponsors Bill to Stop Investment Tax Increase
Stealth surtax in health care bill will hammer middle class/small business
Washington, DC - U.S. Senator Mike Crapo today co-sponsored legislation that would repeal a harmful tax on investment income that was included in the new national health care law enacted earlier this year. Under the Health Care Reconciliation Act, there will be a 3.8 percent surtax on the investment income of taxpayers. Investment income includes interest income, capital gains, dividends, annuities and rents. Though the new tax is initially limited to individuals earning more than $200,000 and families earning more than $250,000 per year, those thresholds are not indexed for inflation. Introduced by Senator John Cornyn (R-Texas), the Economic Growth and Jobs Protection Act of 2010 will remove the 3.8 percent tax on savings and investments earned by taxpayers on a variety of investments. The bill is also co-sponsored by Pat Roberts (R-Kansas).
As the Health Care Reconciliation Act is currently written, the 3.8 percent tax increase is scheduled to go into effect in 2013, and is scored by Joint Committee on Taxation (JCT) to raise $123 billion between 2013 and 2020. Because the $200k/$250k thresholds are not indexed to inflation, the bill will eventually hit individuals, families and small businesses far below those levels. "We would have thought that Congress would have learned its lesson after the disaster with the AMT," noted Crapo. "If it wasn't enough of a mistake to enact a new investment tax increase at a time when our struggling economy is in such need of new investments, failing to even index the thresholds for inflation just means that millions of middle income Americans will be facing another new tax increase in just a few years." Taxpayers, including small businesses, are already scheduled to get hit with the largest tax increase in history in less than 160 days if Congress fails to act and maintain current tax policy.
According to the Institute for Research on the Economics of Taxation (IRET), a 2.9 percent tax would depress economic growth by 1.3 percent and reduce capital formation by 3.4 percent. The damage on job and economic growth would be even greater from the new tax on investment. This $123 billion tax (over seven years) will soon be imposed on capital gains, dividends, rents and interest earned by taxpayers. This permanent tax hike will discourage savings and investment; it will reduce productivity; and it will depress wages and the standard of livings for millions of Americans. This new tax has been referred to by the Wall Street Journal as "ObamaCare's Worst Tax Hike," in an editorial printed earlier this year.
During the debate of the Health Care Reconciliation Act, Crapo offered an unsuccessful motion to strip the bill of all provisions that would result in an increase in tax liability for individuals earning less than $200,000 and families earning less than $250,000, in coordination with the pledge made by the President. "Supporters of the health care bill told us that we needed the pass the bill in order for the American people to learn what was in it," said Crapo. "As more and more middle income American families learn about this new tax increase headed their way, it is my hope that my colleagues in the Senate will get the message that this tax increase must be repealed."