The Coming Tax Hikes

I have mentioned this before. Charlie Rangel's Mother of all Tax Hikes® is only the tip of the tax iceberg, so to speak. There is another massive tax hike already scheduled. It will hit in 2011 when the temporary tax cuts pushed through by George Bush expire. It will be brutal, it will be widespread and a lot of people are going to see major tax hikes. Alex Brill explains:

Yet Chairman Rangel's proposal is not the biggest hike on the horizon. Today's current tax code will "naturally" deliver a tax increase to all taxpayers in 2011. While Republicans have attacked the Democrat's proposal as "the mother of all tax hikes", the biggest tax increase is the pending expiration of the 2001 and 2003 tax cuts. That hike will boost tax collections by over $200 billion a year after 2011, more than twice the size of the revenue raisers proposed by Rangel.

The reason that these "natural" tax increases are on the horizon is a function of the legislative process and bizarre rules of the United States Senate. Senate procedures are such that while a permanent tax increase can be enacted with a simple majority vote under a budget process known as "reconciliation," a permanent tax cut requires support from 60 Senators. Tax cuts can be enacted through the 51 vote reconciliation process but the rules require those cuts to be temporary (up to ten years). As a result of these rules and slim Republican majorities in the Senate, the key individual tax cuts enacted by the Republican Congress over the last six years are set to expire at the end of 2010.

If Congress does not act to prevent these hikes, the impact will be dramatic. According to an analysis by the Treasury Department, for a family of four earning $50,000, it will be, an average tax hike of $2,100. Five million taxpayers currently paying no federal income tax will be brought onto the tax rolls. Marginal tax rates would rise for most taxpayers. The tax on dividend income would more than double and capital gains tax rate would jump from 15 percent to 20 percent. In a time when the tax on capital has been declining in other countries to encourage investment and attract capital, the U.S. tax code is scheduled to head in the opposite direction. (Emphasis added)

Notice where the tax hike will hit? And hit very, very hard. A tax increase of almost $200 a month for a family of four earning $50,000 a year is, frankly, obscene. Yet this is what the Democrats call "tax cuts for the rich". This is what is going to happen, automatically with no further legislative effort needed.

When the taxes hit, the Democrats will have redefined what "rich" means downward even further.