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Relief from Taxmageddon

June 20, 2012

By Emily Miller

Republicans have finally figured out how to corner President Obama on the tax issue. Within six months, Americans will be hit with a $4.3 trillion tax hike supported by Mr. Obama. By moving to pass legislation next month to stop “Taxmaggedon,” the GOP is putting itself on the side of ordinary Americans.

On Tuesday, House Ways and Means Committee Chairman Dave Camp, Michigan Republican, highlighted how the White House tax hike wouldn’t just hit “millionaires and billionaires” but would strike directly at the working class. The Joint Committee on Taxation (JCT) calculated a family of four earning $50,000 would owe Uncle Sam another $2,200 next year if nothing is done. A single mother earning $36,000 would see her tax burden almost double. Married seniors on a fixed income of $40,000 would have to come up with another $1,700 to pay the Internal Revenue Service.

Mr. Camp’s committee is drafting a one-year extension to keep all this from happening. The bill would maintain existing rates for all income levels and for capital gains, dividends and death taxes. It would keep the child tax credit, alternative-minimum tax patch and protection from the marriage penalty. The personal-exemption phaseout and itemized-deduction limitations wouldn’t be reinstated. Republicans would instead end the payroll-tax cut that has proved to be a failure in stimulating job growth.

The timing of the House bill couldn’t be better because Mr. Obama has been humiliated recently by Democrats jumping ship over the tax-hike issue. At least seven Senate Democrats will not vote to raise taxes on anyone unless there’s a bigger deal to cut spending, according to a report in the Hill newspaper. In particular, those running for re-election this year, including Sen. Joe Manchin of West Virginia and Sen. Jon Tester of Montana, refuse to go along with the president’s class-warfare call to raise taxes on those who make over $200,000, including the 50 percent of small businesses that file as individuals.

President Bill Clinton recently said he favored a temporary extension of the current tax rates. This put the former president in hot water with the White House, so Mr. Clinton quickly backpedaled. Congressional Republican leaders including House Speaker John A. Boehner and Senate Minority Leader Mitch McConnell used the wedge to call on the current president to work with them for a one-year tax-rate extension.

Taxmaggedon is much more than just a political-campaign war of words; it has serious impact on the U.S. economy. According to the JCT, continuing low-tax policies would prevent a $300 billion tax increase in 2013 alone. The uncertainty of what – if any – tax rates will go up and to what levels has paralyzed small businesses and investors, which has put the brakes on private-sector job creation.

The Senate might have enough votes to pass the House’s extension of all rates. The question is whether Mr. Obama is willing to stake his re-election on further harming the economy by blocking it.