On January 1, 2011, Americans will face the biggest tax hike in history. If Congress fails to act, marginal tax rates will increase for every taxpayer, the capital gains rate climbs 33%, and dividend rates jump by as much as 164%.
Congress must act now to prevent this tax increase. Extending existing tax rates would, in one bold stroke, boost investor, business, and consumer confidence by taking the uncertainty of tax policy off the table. It would leave hard earned income in the hands of the individuals and businesses that earned it and allow them to spur investment, boost consumption, promote economic growth, and create jobs.
Instead, Congress wants another $2.6 trillion from Americans in the form of higher taxes, despite the fact that President Obama's own economic advisor tells us "tax increases are highly contractionary." It’s something we simply can’t afford.
American small businesses, our economic jobs engine, will face marginal tax rates as high as 39.6%. Compounded with the loss of certain itemized deductions and personal exemptions, these small businesses face rates as high as 41.6%. And this increase hits our successful small businesses, our job creators, particularly hard. Approximately half of the business income reported on tax returns in 2011 will be subjected to the top two marginal rates.
Older Americans also have a good reason to worry, as they will be disproportionately hurt by tax increases on investment income. In 2008, 71% of dividend income was earned by taxpayers age 55 and older. A third of taxpayers with capital gains income were 65 and older. Another 40% of those with capital gains income were between ages 45 and 65, earning nearly half of all capital gains income. These Americans, who have invested for decades for retirement, will feel the pain.
