Five reasons Congress should act now to stop Taxmageddon

posted at 4:45 pm on May 18, 2012 by Rob Bluey

Americans are facing an unprecedented $494 billion tax hike on Jan. 1, 2013. It’s been dubbed “Taxmageddon” given the economic devastation it would cause.

Conventional wisdom suggests lawmakers in Washington will wait until the 11th hour to come up with a solution. Fortunately, Speaker John Boehner (R-OH) announced this week he won’t wait for a lame-duck session of Congress. From his speech to the Peter G. Peterson Foundation’s 2012 Fiscal Summit:

Tax hikes destroy jobs – especially an increase on the magnitude set for January 1st. Small businesses need to plan. We shouldn’t wait until New Year’s Eve to give American job creators the confidence that they aren’t going to get hit with a tax hike on New Year’s Day. Any sudden tax hike would hurt our economy, so this fall – before the election – the House of Representatives will vote to stop the largest tax increase in American history.

The bulk of Taxmageddon comes from expiration of the 2001 and 2003 Bush tax cuts, but also means the child tax credit will be cut in half, the Alternative Minimum Tax patches end, the Death Tax returns to its 2001 level, and a handful of new Obamacare tax hikes take effect.

Here’s the outlook under different policy scenarios:

If this isn’t enough to scare you, then the prospect of waiting until after the November election should be. Here are five good reasons from Heritage’s J.D. Foster why Congress should act now:

  1. Families and small businesses should not be threatened by their own government with a devastating tax hike.
  2. A massive tax hike would obviously devastate the economy in 2013 and beyond, but the uncertainty about how, when, and even whether Congress will prevent Taxmageddon is already adding to the large cloud of uncertainties hanging over the economy, threatening to slow job growth even further.
  3. Congress has no excuse for threatening families and the economy with this tax hike with the entire summer legislative schedule wide open for business.
  4. Many Members of Congress of both parties agree with President Obama on the need for fundamental tax reform. Allowing Taxmageddon to go into effect would raise tax rates while increasing the tax on saving and investment—the opposite of tax reform’s results. Even though positive reforms are extremely unlikely in 2012, Congress can prevent a severe case of sound policy backsliding and create more opportunities for exploring positive options for tax reform in the balance of the year by preventing Taxmageddon quickly.
  5. Elections are referendums on past decisions and on the future direction of the country. Voters should be able to judge performance of their Members on more than just vague assurances. Those favoring raising taxes should have the opportunity to vote their beliefs while challengers announce their fidelity to higher taxes, and likewise for those favoring low taxes and limited government. Citizens can vote their beliefs based on solid information.

Conservatives should applaud Boehner for seeking a solution sooner rather than later. But without action from the do-nothing Senate, there’s little hope of stopping this enormous and unprecedented tax increase before November.

Rob Bluey directs the Center for Media and Public Policy, an investigative journalism operation at The Heritage Foundation. Follow him on Twitter: @RobertBluey


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I’d vote for “let the tax cuts expire” if we could guarantee that the Democrats won’t invent new uses for the extra money and would instead use the money to pay down our debt.

Since they certainly won’t do this, I’m not about to give them any extra.

unclesmrgol on May 18, 2012 at 4:49 PM

Nothing will happen between now and the end of the year. Even if the GOP comes out with a plan it will be blocked in the Senate by none other than Harry reid. Taxmageddon will happen and it will be blamed on the GOP.

banzaibob on May 18, 2012 at 4:51 PM

Shut the whole dang thing down as far as I care. Starve em, except for vital services.

Bmore on May 18, 2012 at 4:55 PM

By my count we would need to raise taxes 32% just to break even in 2013. What does that say about our spending that the requisite tax increase would collapse the economy?

http://www.fiscalwars.wordpress.com

stout77 on May 18, 2012 at 5:01 PM

I think a large plurality of the workforce have never known anything but the Bush tax rates. They ARE the tax rates, not some temporary cuts. Can we please stop calling them “cuts”, by now?

Or maybe we need another decade of them to feel as though they are “the rates”.

ThePrimordialOrderedPair on May 18, 2012 at 5:06 PM

How can we play fair if the rules are at the whim of 0bama.

I hate to admit it but the last three years has made us a nation of men and not laws. Just ask the head of the Department Of inJustice, Eric Murderer.

We will not like what a second…third…fourth term(s) of 0 will bring. I could just be afraid to post at such subversive to Leader 0bama sites like this.

jukin3 on May 18, 2012 at 5:06 PM

Nothing will happen between now and the end of the year. Even if the GOP comes out with a plan it will be blocked in the Senate by none other than Harry reid. Taxmageddon will happen and it will be blamed on the GOP.

banzaibob on May 18, 2012 at 4:51 PM

Of course not. If Repubs win, they bear the brunt of tax increases that begin with the new year.

If Dims win, they have between Nov. and Jan to “soften the blow” (not likely) OR they put the pedal to the metal.

Dims see it as as win-win.

IrishEyes on May 18, 2012 at 5:13 PM

As soon as I finish my pizza and beer and watching my baseball game I will come up with some really spiffy earth shattering suggestions on how to button this tax issue down.

timberline on May 18, 2012 at 5:16 PM

I’d vote for “let the tax cuts expire” if we could guarantee that the Democrats won’t invent new uses for the extra money and would instead use the money to pay down our debt.

Since they certainly won’t do this, I’m not about to give them any extra.

unclesmrgol on May 18, 2012 at 4:49 PM

There is no extra money, even with taxes returning to their pre-Bush rates!

And these tax increases are contingent upon deep spending cuts, split between defense and domestic programs unless the supercommittee can pass another plan.

http://www.csmonitor.com/Commentary/Opinion/2011/1102/Super-committee-Let-Bush-tax-cuts-expire-and-your-work-will-be-done

bayam on May 18, 2012 at 5:18 PM

“Recovery Summer” has been postponed till 2014 at the soonest.

Deafdog on May 18, 2012 at 5:30 PM

Five reasons Congress should act now to stop Taxmageddon

Does ANYBODY think – for even one nanosecond – that the d-cRAT socialist/RINO-controlled Senate wants to stop these upcoming massive, economy-destroying tax increases ???????

(NB: If you do, get psychological help NOW.)

TeaPartyNation on May 18, 2012 at 5:31 PM

I think a large plurality of the workforce have never known anything but the Bush tax rates. They ARE the tax rates, not some temporary cuts. Can we please stop calling them “cuts”, by now?

Or maybe we need another decade of them to feel as though they are “the rates”.

ThePrimordialOrderedPair on May 18, 2012 at 5:06 PM

Sorry, but with agreement from the liberal media, the proggies are fully in charge of the language.

slickwillie2001 on May 18, 2012 at 6:00 PM

For a while now (last 3.25 years)I’ve been wondering if The One isn’t trying to throw this election. When I see numbers like this I am left thinking he might be just setting up the winner/Romney with an impossible situation to deal with. Hell, Obama is bored with the job anyway (it’s his first full-time job ever). Something just doesn’t smell right lately. Either way, he’s setting it up so that massive tax increases will be the only way out and if Romney’s the boss, the headlines and DNC campaign ads will focus on how Romney and the GOP presided over the largest tax hike on the middle-class (while the rich got richer…yadayadayada).

mxt on May 18, 2012 at 6:26 PM

…That’s all Congress can do is ACT…there is no reality!

KOOLAID2 on May 18, 2012 at 6:36 PM

Barry is not interested. It’s not about him. Reid doesn’t even know what day it is. Pelosi is too busy picking out new curtain fabric, thinking she’s moving back into the Speaker’s Office.

GarandFan on May 18, 2012 at 6:51 PM

So under Obama, we currently have the lowest tax burden in history. No wonder the deficit is going through the roof.

ZippyZ on May 18, 2012 at 7:03 PM

Unless the plan includes ditching the entire tax code for 2013, there should be no changes by this congress before or after the election!

At worst, whatever the new plan is, it can be waiting for implementation on inauguration day or Jan 1st when Obama and his new super majority senate and Pelosi controlled house take charge!

Freddy on May 18, 2012 at 8:05 PM

Smoke and mirrors. They’re getting theirs (what used to be ours) through the Federal Reserve Board’s manipulation of interest rates and the inflation we have to pay on goods and services.

Dr. ZhivBlago on May 18, 2012 at 10:20 PM

Why isn’t it “taxaggedon? That “m” annoys me.

CVMA-Dredd on May 19, 2012 at 12:06 AM

Why isn’t romney shouting this from the roof tops?

Here is Obama cluess, braindeaf or criminal

http://www.youtube.com/watch?v=c4iy2OfScQE&feature=youtube_gdata_player

Use this one mitt,dare ya

audiotom on May 19, 2012 at 2:10 AM

Can we remove the unneeded M and call it Taxaggedon? A much smoother roll off the don’t tongue, don’t you think?

leftnomore on May 19, 2012 at 4:44 AM

Haha… I see I just repeated CVMA-Dredd, sorry!

leftnomore on May 19, 2012 at 4:45 AM