Tax Revenue Doesn't Grow on Christmas Trees
by U.S. Senator Chuck Grassley
When an Iowa family gathered around the Thanksgiving table in November, the conversation between a retired farmer and a young attorney in the family evolved into a discussion about death and taxes.
A time-sensitive predicament in federal tax policy seems to turn a philosophical observation often attributed to Mark Twain on its head: "the only two certainties in life are death and taxes."
That's because unless Congress extends federal estate tax relief by December 31, the farmer's children and grandchildren gathered around the Thanksgiving table would be liable for up to a whopping 55 percent of his lifetime's worth of assets (less a $1 million exemption) starting New Year's Day. So in addition to the lifetime's worth of income, investment and property taxes the farmer has already paid throughout his career, his family would be liable for what amounts to a confiscatory tax known as the federal estate tax. Come January 1, farmers and small business owners who have scrimped, sacrificed and saved their entire lives to build up a family business might see that Uncle Sam entitled to more than half of their estates if this Congress doesn't act.
In fact, across-the-board tax hikes set to go into effect on New Year's Day would be the largest tax dollar increase ever imposed on the American people and U.S. businesses, including small businesses where 70 percent of the jobs are created.
Partisanship in Washington is slowing down an agreement that must be reached by New Year's Eve. Otherwise, the lowest marginal rate will climb from 10 percent to 15 percent and the highest will jump to 39.6 percent from 35 percent.
Big spenders like to gin up the politics of class warfare, pitting high-income taxpayers against those with lower-incomes. While it may score cheap political points, the time-worn tactic comes at the expense of the public good.
Contrary to what the Democratic leaders in Washington portray, raising taxes is not the magical cure that will shrink the deficit. Raising taxes gives big spenders in Congress a license to create new layers of government and put taxpayers on the hook for even more entitlements. Bumping up tax rates siphons money out of the private sector and actually would shrink the Gross Domestic Product. According to the non-partisan Congressional Budget Office, the GDP would grow as much as 1.4 percent higher in 2011 if all the tax relief is made permanent.
Lawmakers need to support pro-growth, job-creating policies that expand the economic pie, not shrink it. Growing the economy will expand the tax base.
Economists widely agree that raising taxes right now is a bad idea, especially considering that unemployment is breathing down the neck of our struggling economy.
Jacking up taxes is a sure-fire way to deep-freeze hiring and hijack the fragile economic recovery. Businesses storing up capital are reluctant to create jobs and take on new payroll obligations, especially when they don't know what their tax obligations will be starting in January.
Part of the blame is attributable to the uncertainty over the direction of U.S. tax policy. If Congress fails to extend the marginal tax rates, small businesses will take a big hit. No wonder the unemployment needle inched higher in November according to the U.S. Bureau of Labor Statistics. Businesses don't know if they can afford to expand their payroll.
The mid-term elections delivered a clear message. Americans want Washington to stop overspending and overtaxing the people of the United States.
As Iowa's senior U.S. Senator, I've taken this grassroots message to the lame-duck session of Congress. Incredibly, some lawmakers seem to think that letting taxpayers keep more of their own money is like handing out "bonuses."
Something tells me that Iowa families who are worried about less take-home pay in January don't consider extending the current tax rates a bonus, a windfall or a handout.
Some lawmakers just don't get it. Tax revenue comes from their constituents' hard-earned money. It doesn't grow on Christmas trees, no matter how fanciful the rhetoric gets about millionaires versus the unemployed.
Call it a hunch. But I have a feeling the retired farmer and his family will have an even livelier discussion come New Year's Eve if Washington doesn't do the right thing and vote down the biggest dollar tax increase in U.S. history.
Monday, December 6, 2010
