I have received a lot of letters from my constituents about the pending tax increases, and for good reason. Americans will pay higher taxes starting January 2011 if Democrats in Congress do not move to stop the expiration of tax relief passed several years ago. Taxes would increase $3.8 billion and everyone who pays taxes would pay more.
With unemployment currently at 9.6 percent and a stagnating economy, raising taxes will slow economic growth by discouraging job creation and investments. I believe that the American people know better than the federal government how to spend their own money.
Excessive government spending, which adds to the national debt, also puts a drag on the economy. That is why I introduced the SAFE Act to rein in spending and bring the U.S. back to a balanced budget. To read more about this legislation, click here.
So what are the tax increases and who will they affect?
Part I: Individuals and Families
- If you paid any income tax in 2010, you will see an increase, and middle class earners will be hit particularly hard.
- If you are married and filing jointly, you will pay more in taxes when the marriage penalty is reinstated.
- If you are a parent, your child income tax credit in 2011 is scheduled to decline from $1,000 to $500.
Part II: Job Creators
- Small businesses will be hit by from an increase in income and estate taxes.
o According to the National Federation of Independent Business, 75 percent of small businesses (i.e., S Corporations) are organized in such a way as to pay business taxes based on individual tax rates. If the income tax rates for the top two income brackets increase, small businesses will be negatively impacted.
o Additionally, family-owned small business survival will be jeopardized if the estate tax is not reduced or abolished completely. When hit with the death tax, business owners are often forced to sell their companies to pay the tax. More family-owned businesses will be subject to the death tax if the estate tax exemption increases to $1 million and the rate increases to 55 percent.
Part III: Seniors
- Pending increases in capital gains and dividends will hurt seniors’ retirement savings portfolios. According to the Joint Committee on Taxation (JCT), 8 million tax returns filed by seniors will face taxes on investment income by the 2011 tax hike. On average, this would amount to paying an additional $1,700 in taxes, a real burden for the many that already live on a fixed income.
