Senate GOP Minority Leaders and Taxes
The White House and Democratic leaders in Congress are intent on imposing a major tax increase at the end of this year. The only debate among this elite group is not if a tax hike is coming, just how big will it be.
If nothing is done, all of the 2001 and 2003 tax cuts will be wiped out. Or, if the President and congressional leaders have their way, taxes will rise on upper income earners. And make no mistake, that's largely about increased taxes on entrepreneurs, investors and small business income.
It seems that the President and Democratic leaders are counting on increased government spending, debt, regulation and taxes to somehow benefit small businesses and the overall economy.
U.S. Senator Mitch McConnell (R-KY) has a different take on matters.
In a September 13 statement, Senator McConnell countered with the following points:
- "Rather than implement the policies that would free up capital, lead to investment, and create good, lasting, private-sector jobs, Democrats in Congress have passed one sweeping, government-driven scheme after another, then asked taxpayers to put it on their tab. A Stimulus bill that was supposed to be timely, targeted, and temporary turned out to be a liberal wish-list. Instead of stimulating the economy and keeping unemployment below 8%, as promised, we stand here today with nearly 10% unemployment nationwide and many more Americans struggling to find full-time work. A health care bill that was supposed to lower costs is doing the opposite. As I've repeatedly said in the past, and as a new government report confirmed just last week, the President's health care plan will bend the cost curve up - not down. And a financial regulatory bill that was supposed to protect Main Street is being embraced by some of the biggest players on Wall Street, while small town bankers and retailers brace themselves for the costly and burdensome rules and regulations it will impose on them."
- "We can't let the people who've been hit hardest by this recession and who we need to create the jobs that will get us out of it foot the bill for the Democrats' two-year adventure in expanded government. We can't allow America's job creators to pay for Democrats' out-of-control spending over the past two years any more than we can allow Main Street to pay for the greed of Wall Street."
- "And this is no small tax hike. The tax hike the administration is proposing, according to the IRS, would apply to half of all small business income in this country. ... All told, according to the nonpartisan Joint Committee on Taxation, hundreds of thousands of small businesses would see their taxes go up next year under the administration's plan. Here's the bottom line: no recovery will take place until the government stops over-spending. No recovery will take place until government stops imposing new regulations and costs on business. No recovery will take place if we impose new taxes on the people we need to create jobs."
Senator McConnell, along with Senator Charles Grassley (R-IA), introduced an alternative tax plan - the Tax Hike Prevention Act. This measure includes:
- maintaining current personal income tax rates, with a top rate of 35% -- as opposed to it rising to 39.6%;
- increasing the exemption for the alternative minimum tax;
- preserving the current capital gains and dividends tax rate - with the top rate for each remaining at 15%, rather than increasing to 20% on capital gains and 39.6% on dividends.
Unfortunately, the only item in this Tax Hike Prevention Act that actually does not prevent a tax hike is on the estate, or death, tax. Under current law, the death tax does not exist in 2010, but is scheduled to return in 2011, with an exclusion of $1 million and a top rate of 55% (60% for certain estates).
The McConnell-Grassley proposal would not make the death tax termination permanent. Instead, it provides for a 35% tax rate; a unified exemption amount of $5 million (per individual), which is indexed for inflation; and a stepped-up basis for inherited assets.
The McConnell-Grassley death tax proposal is better than what's currently scheduled, or proposed by the President (the Obama budget plan calls for imposing a death tax with a 45% tax rate and an exclusion level of $3.5 million for individuals), but business and investment would be far better off if the death tax were allowed to remain dead.
is chief economist for the Small Business & Entrepreneurship Council.
www.sbecouncil.org
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