Democrats' Ticking Tax Bomb, Part II

How the Democrats’ Year-end Tax Hike Will Affect Typical Taxpayers

As described in Part I of this series, starting January 1, 2011, Washington Democrats will impose a $3.8 trillion tax hike on hard-working Americans. This tax increase will affect every American who pays income taxes through higher tax rates on individuals, families, and small businesses. Married couples and parents will be singled out for even higher taxes, and there will be significant tax hikes on the very investments that grow the economy and create good jobs. Even the death tax – repealed entirely for 2010 – will be resurrected on January 1, 2011. So far, Democrats have done nothing to disarm this ticking tax bomb.

So how will the family budgets of typical taxpayers be affected by these looming Democrat tax hikes?

A family of four earning $50,000 per year could pay more than $2,100 in higher taxes.
A single mom earning $36,000 per year could pay over $1,100 more in taxes.
Married senior citizens earning $40,000 per year could pay more than $1,400 in higher taxes.

Here are the details:

Typical Tax Return #1: Middle-income family of four
Filing Status: Married, filing joint return Children: 2 Adjusted Gross Income: $50,000
	Without Democrats' 2011 Tax Hike	With Democrats' 2011 Tax Hike
Standard deduction	$11,600	$9,750
Personal exemptions	$15,000	$15,000
Taxable income	$23,400	$25,250
Tax liability	$2,652	$3,788
Child credit (non-refundable portion)	$2,000	$1,000
Total tax	$652	$2,788
Democrats' 2011 tax increase: $2,136

Calculations are based on Joint Committee on Taxation (JCT) estimates of various tax parameters reflecting expected inflation adjustments for 2011.

Typical Tax Return #2: Modest-income single parent
Filing Status: Head of Household Children: 1 Adjusted Gross Income: $36,000
	Without Democrats' 2011 Tax Hike	With Democrats' 2011 Tax Hike
Standard deduction	$8,600	$8,600
Personal exemptions	$7,500	$7,500
Taxable income	$19,900	$19,900
Tax liability	$2,373	$2,985
Child credit (non-refundable portion)	$1,000	$500
Total Tax	$1,373	$2,485
Democrats' 2011 tax increase: $1,112

Calculations are based on Joint Committee on Taxation (JCT) estimates of various tax parameters reflecting expected inflation adjustments for 2011.  

Typical Tax Return #3: Married senior citizens
Filing Status: Married, filing joint return Children: 0 Adjusted Gross Income: $40,000, including $5,000 in dividends ($100,000 invested, 5% yield)
	Without Democrats' 2011 Tax Hike	With Democrats' 2011 Tax Hike
Standard deduction	$13,800	$13,800
Personal exemptions	$7,500	$7,500
Taxable income	$18,700	$18,700
Qualified dividends	$5,000 taxed at 0% (special rate for taxpayers in the 10% or 15% brackets)	$5,000 taxed at 15% (ordinary income rate)
Total tax	$1,370	$2,805
Democrats' 2011 tax increase: $1,435

Calculations are based on Joint Committee on Taxation (JCT) estimates of various tax parameters reflecting expected inflation adjustments for 2011.

While the effect of these Democrat tax increases on any particular taxpayer’s family budget will depend on that taxpayer’s specific facts and circumstances, these typical tax returns make clear that this is a massive tax hike that the American people simply can’t afford.

As these examples show, married couples and taxpayers with children will be hit particularly hard by the Democrats’ tax hike. For more detail about the re-imposition of the marriage penalty and the reduction in the child credit scheduled for January 1, 2011, stay tuned for Part III of this series, coming soon.

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Ways and Means Republican Press Office
www.Republicans.WaysandMeans.House.Gov
202.226.4774

Democrats' Ticking Tax Bomb, Part I

Overview: Americans to Pay Higher Taxes Starting January 1, 2011

Get ready to pay higher taxes in 2011 thanks to Democrats in Washington. Starting January 1, 2011 – less than six months from now – an unprecedented, $3.8 trillion tax increase is scheduled to kick in, affecting every American who pays income taxes. This Democrat tax hike will force hard-working Americans to pay over $200 billion in higher taxes next year alone.

What are some of these tax increases? They include:

Higher Income Tax Rates on ALL Americans Who Pay Income Taxes
Individuals and Small Businesses* with Taxable Income in the Following Ranges…	… Pay This Statutory Rate on that Range of Income in 2010…	…But will Pay This Statutory Rate on that Range of Income in 2011
Up to $8,375 for single filers and Up to $16,750 for married couples	10%	15%
Between $8,375 and $34,000 for single filers and Between $16,750 and $68,000** for married couples	15%	15%
Between $34,000 and $82,400 for single filers and Between $68,000** and $137,300 for married couples	25%	28%
Between $82,400 and $171,850 for single filers and Between $137,300 and $209,250 for married couples	28%	31%
Between $171,850 and $373,650 for single filers and Between $209,250 and $373,650 for married couples	33%	36%
Over $373,650 for both single filers and married couples	35%	39.6%***

Dollar amounts listed in the table above will be indexed for inflation in 2011.  Amounts listed for married couples are for married couples filing joint returns.
*According to the Joint Committee on Taxation (JCT), 94% of all U.S. businesses in 2007 were S corporations, partnerships, or sole proprietorships – “pass-through” business types commonly used by small businesses – that file their taxes on their owners’ individual Form 1040s and pay taxes at the individual tax rates.
** Because of one of the marriage penalties that will be reinstated (see below), this $68,000 amount will drop to $58,200 in 2011, meaning that a married couple with as little as $58,200 in taxable income will be subject to the higher 28% rate on their next dollar earned, rather than the 15% rate.
*** Because of the reinstatement of additional, hidden tax rates (see below), while the top statutory rate will be 39.6% in 2011, the top effective rate will actually be 41.6%.

Higher Taxes if You Are Married
For Married Couples Filing Jointly, the Marriage Penalty Is Reinstated With Respect To...	2010	2011
The Standard Deduction	Singles: $5,700 Married:  $11,400 No marriage penalty because the standard deduction for married couples is twice the standard deduction for singles	Singles: $5,800 Married: $9,750 Marriage penalty is reinstated because the standard deduction for married couples is $1,850 less than twice the standard deduction for singles
The last dollar of income taxed at the 15% rate (instead of at 25% in 2010 or at 28% in 2011, the next highest tax rate in effect)	Singles: $34,000 Married:  $68,000 No marriage penalty because the last dollar of income taxed at 15% (instead of at 25%, the next highest rate) for married couples is twice the corresponding amount for singles	Singles: $34,850 Married: $58,200 Marriage penalty is reinstated because the last dollar of income taxed at 15% (instead of at 28%, the next highest rate) for married couples is $11,500 less than twice the corresponding amount for singles

Dollar amounts listed in the table above for 2011 are JCT estimates reflecting expected inflation adjustments.

Higher Taxes if You Are A Parent
Pro-family Tax Benefit	2010	2011
Child Tax Credit	$1,000 per child	$500 per child

 

Higher Taxes on Investments that Grow the Economy and Create Good Jobs
Investment Incentive	2010	2011
Top rate on long-term capital gains	15%	20%*
Top rate on qualified dividends	15%	39.6%*

* Because of the reinstatement of additional, hidden tax rates (see below), while the top statutory capital gains rate will be 20% in 2011, the top effective rate will actually be 22%.  For dividends, while the top statutory rate will be 39.6% in 2011, the top effective rate will actually be 41.6%. 

Note that, under the Democrats’ new health law, beginning in 2013, investment income will be subject to an additional 3.8% surtax for single taxpayers earning more than $200,000 and married couples earning more than $250,000.  This will bring the top statutory rate on capital gains to 23.8% and the top statutory rate on dividends to 43.4% in 2013.  Because of the additional, hidden tax rate increases described below, however, the top effective rate on capital gains will be 25.8% in 2013, and the top effective rate on dividends will be 45.4%.

Higher Taxes through Additional, Hidden Tax Rate Increases
Hidden Tax Rate Increase Reinstated	Individuals and Small Businesses* with Adjusted Gross Income…	… Pay this additional, hidden tax rate increase in 2010…	… But pay this additional, hidden tax rate increase in 2011
Personal exemption phase-out (PEP)	Above $171,000 for single filers and Above $256,700 for married couples filing jointly	None	Approximately 0.8%
Pease limitation on itemized deductions (such as mortgage interest, charitable contributions, and state and local taxes)	Above $171,000 for both single filers and married couples filing jointly	None	Approximately 1.2%
Top effective marginal tax rate on income (including dividend income) in 2011, including reinstatement of these hidden tax rate increases:     39.6% (top statutory rate)       0.8% (PEP) +    1.2% (Pease limitation)     41.6%

*According to the Joint Committee on Taxation (JCT), 94% of all U.S. businesses in 2007 were S corporations, partnerships, or sole proprietorships – “pass-through” business types commonly used by small businesses – that file their taxes on their owners’ individual Form 1040s and pay taxes at the individual tax rates.

Dollar amounts listed in the table above are JCT estimates for 2011 reflecting expected inflation adjustments.

Note that, under the Democrats’ new health law, beginning in 2013, dividend income will be subject to an additional 3.8% surtax for single taxpayers earning more than $200,000 and married couples earning more than $250,000.  Factoring in the additional, hidden tax rate increase described in this table, the top effective rate on dividends will be 45.4% in 2013.

Resurrection of the Death Tax
Estate Tax Provision	2010	2011
Exemption amount	N/A – Death Tax repealed	$1 million
Top rate	N/A – Death Tax repealed	55%

For examples of how these looming tax hikes will affect typical American taxpayers, stay tuned for Part II of this series, coming soon.

Floor Statement of Ranking Member Dave Camp (R-MI) re: H.R. 4380, the Miscellaneous Tariff Bill

I am disappointed that I cannot support this legislation.

The Miscellaneous Tariff Bill has long been a bipartisan effort that helps both American manufacturers and consumers obtain lower-cost access to products that aren’t made in the United States.

The process used to assemble this legislation is a model in transparency and accountability. This is a long-standing process that has been used by many Congresses – under both Republican and Democrat control – and should serve as an example of how similar legislation should be prepared.

• Every provision is first introduced as a separate bill.
• Each provision is vetted by the Administration and by the U.S. International Trade Commission and is subject to public notice and comment.
• All information is posted on the Committee website.
• Any provision receiving any opposition is removed from the final package.

In my view, this bill technically does not contain earmarks in the form of limited tariff benefits. Each provision lowers duties on imports, and any company or person that imports that product receives the benefit of those lower duties, not just those we can positively identify today. Despite these facts, Democrats have written the rules of the House in such a way as to treat limited tariff benefits like other earmarks. The Democrats were wrong to do so.

But the Republican Conference has taken the position, and correctly so, that we are taking a one-year moratorium on all the provisions included in the Democrat Rule to demonstrate our commitment to getting government spending under control. I am committed to both the letter and spirit of that moratorium and therefore will vote against this bill.

In fact, the Majority is well aware of our earmark ban, and I can’t help but wonder if this bill was put on the suspension calendar – after three-and-a-half years without a vote – so that it would fail and they might avoid taking the blame. It is a sham and it won’t work. The business community knows it, the American workers whose jobs depend on it know it, and we know it – Democrats have had three-and-a-half-years to pass the MTB and they have failed to do so.

Congress has not passed an MTB bill since December 2006 -- right before the Democrats took the Majority. The only new trade bill they have considered in that time is the Peru trade agreement.

I think the record speaks for itself – Republicans have long-supported the MTB and U.S. employers while the Democrats have written rules that discriminate against this bill. More importantly, business investment and hiring are frozen in the face of looming tax hikes, smothering government regulation and little or no action on the trade agenda – all brought about by Washington Democrats.

A true commitment to trade and the good-paying U.S. jobs it provides would involve passing the pending bilateral trade agreements, which, economically, are even more important to this country.

Mr. Speaker, what you are seeing today is merely one more attempt by the Majority to distract American workers and employers from the real damage they’ve done to the American economy. This legislation cannot overcome the over $670 billion in new taxes already passed by this Congress and the billions more coming. It cannot overcome the anti-business attitude of so much of the legislation produced by the Majority.

Mr. Speaker, if my friends on the other side of the aisle were truly interested in helping American manufacturers, they’d be lowering taxes, knocking down trade barriers, and supporting the private sector. This legislation is no substitute for those policies.

Mr. Speaker, the House should take a breather from earmarks, as called for in the Republican Conference Moratorium. It is unfortunate that this pause includes the MTB, but we didn’t write the Rule. I urge my colleagues to show the American people we are serious about reforming the way Washington works and vote no. I reserve the balance of my time.

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Ways and Means Republican Press Office
www.Republicans.WaysandMeans.House.Gov
202.226.4774