As America seeks to stay the leader of the free world, it will be ushering in the New Year with a bunch of big time tax increases. Yes, for 98%, or so, of the households in America, the Bush era tax cuts on marginal rates of income earned will stay in place. But, Congress and the President have made sure payroll taxes will increase this year by more than $2000 for those employees with incomes in the 100 K per year range, and that there will be substantial payroll tax increases, as well, for those in the 20K to 100K per year income range.
For those families with incomes above 450 K per year, there will be about a 10% increase in marginal rates of income taxation and a 33% increase in capital gains and dividend taxes, starting with those with incomes in the 300K range.
Those with incomes above 300 K are major league job creators and the income tax, capital gains tax and dividend tax increases referenced above will be major “drags,” on efforts to reduce unemployment in this country. Adding to those “fiscal drags.” on efforts to reduce unemployment in this country will be caps on income tax deductions, which amount to further increases in the marginal rates of income taxation.
Moreover, the payroll tax increase will reduce the incentive to work—compounding the above referenced reductions in the incentives to save and invest, causing further impediments to the efforts to increase economic growth and employment. Everything else equal, as the economists say, the above referenced tax increases will slow the rate of economic growth (already at modest levels of 1.5 to 2%) and reduce the well being of the great majority of Americans.
Moreover, neither the Republican nor the Democrat political leaders seem to understand the primary harm caused by their joint yearning to mess around with spending and tax levels and their joint readiness to agree with or acquiesce in increases in both.
Business, on the other hand, yearns for reductions in uncertainty, as well as reductions in government spending, tax levels and business regulation, so that they can look forward to both higher and more stable after tax rates of return-- as they seek to compete in the global market place. Of course, these higher rates of return mean more job growth and economic mobility for those in the low and middle income socio-economic strata. That’s what promotes advancement and progress for such individuals, not a myriad of ineffective and inefficient government “poverty,” programs, which tend to increase, not decrease, the number of poor people.
Finally, the electronic and print business journalists who referred to yesterday’s legislation as making the Bush tax cuts “permanent,” are beyond stupid. What they should have said is that the tax cuts did not “sunset,” as did the original Bush tax cuts, which meant action was required by Congress in 2010 to extend them to 2012. But, the tax cuts passed yesterday can be removed or repealed by Congress at any time. Some permanency! Sweet Jesus, can’t anybody in journalism play this game of applying basic economics to assess and analyze business, regulatory and tax legislation? Or, do I have to do everything around here?