July 11, 2010

Coming soon from the Democrats: The worst tax increases of 2011

July 11, 2010
By Herman Cain

All tax increases are bad, but there are some that are just plain unfair and punitive for no logical reason. The marriage penalty, the small business penalty, the retirement penalty, and the death penalty are in that category.

Everyone except the most clueless “mushrooms” of our society know that tax rates will return to 2000 levels if the Democrat-controlled Congress does nothing to stop them.

And they have shown a real skill for doing nothing but legislative carnage to this country in the last 18 months. That carnage has included the publicly unpopular Health Care Deform bill, the House-passed Cap and Trade and Tax and Kill (Jobs) bill, and the newly proposed Dodd-Frank Financial Deform bill. The full negative economic impact of those penalties on our economy continues to unfold.

Most people are equally unaware that these automatic tax increases come about because of a sunset clause in the 2000 tax decrease legislation. In order for the then Republican-controlled Senate to get enough Democratic votes to pass the legislation, they had to agree to the sunset clause. The Republicans were betting that the benefits of the tax cuts would be so obvious that the Democrats would not dare let them expire. The Democrats were betting that they could bad mouth the so-called “Bush” tax cuts enough that the “mushrooms” would believe the tax cuts were a big reason for our runaway deficits.

The Democrats won and they insured their bet by being the catalyst for exponentially escalating deficit spending. The Republicans got sucker punched by the Democrats again, because collectively they thought there was no way the Democrats would allow obviously unfair tax penalties to be re-instated. And just as the Democrats do not care if legislation is good or bad as long as it enhances their big government agenda, they do not care about fairness in the tax code.

Americans for Tax Reform reports that as of January 1, 2011 the standard deduction for married couples will no longer be double that for a single person. They are also penalized for having children, since the child tax credit will be cut in half from $1000 per child to $500.

Small businesses (Subchapter S corporations) will no longer be able to expense equipment purchases up to $250,000. The new limit will be $25,000 which is equivalent to a tax increase. To add insult to injury, their business profits will be taxed at the higher personal income tax rates, if they make a profit.

Many retirees work and save all of their careers to be able to retire on dividends on their savings, stocks and bonds. These dividends will no longer be taxed at the long-term capital gains rate of 15 percent. They will now be taxed as ordinary income at a top bracket rate of 39.6 percent.

The dreaded death tax will return to a 55 percent top rate on estates over $1 million. It does not take very long to be worth $1 million when you start adding up the value of your home, automobiles, savings, investments and even life insurance proceeds. “Selling the farm to save the farm” is back.

The reality of these punitive policies is that they will not generate a net increase in tax revenues, because they discourage taking business risks to create jobs, as well as marriage, savings and dying. We cannot stop dying, but we do not need to be unfairly killed by taxes while we are alive.

Even worse, we should not be killing an economy that’s already on life support.

That will surely happen if the Democrats do nothing.