The IRS deadline for filing 2011 tax returns is upon us. Would you think I'm crazy if I said you should enjoy it? As painful as it may be to write this year's check to Uncle Sam, it could be the smallest check you'll write for years to come.
That's because all the tax-relief provisions passed in 2001 and 2003 are set to expire on Dec. 31, 2012. Without a single vote by Congress or signature by the president, federal taxes could rise by $3.8 trillion over a decade.
We're already stuck in the weakest recovery since the Great Depression. A tax hike of this magnitude could smother today's slow growth and modest job creation. The prospects are especially grim for small businesses that pay taxes on their companies' profits at the individual rate — they could see their top tax rates jump from 35 percent to nearly 40 percent.
On Jan. 1, many successful individuals and small businesses would also help pay for the Patient Protection and Affordable Care Act. Currently, 2.9 percent of their earnings are deducted for the Medicare tax. Next year, that would increase 0.9 percent, and a new 3.8 percent surcharge would be levied on investment income.
There's more! Limits on itemized deductions for high-income earners and small businesses would be reinstated. Capital gains taxes would rise from 15 percent to 20 percent. Dividend taxes for some taxpayers would surge from 15 percent to nearly 40 percent. Estate taxes would rise from a maximum rate of 35 percent today to 55 percent, and the exemption threshold would dip from $5 million estates to $1 million.
Through its recent budget proposal, the Obama administration has suggested additional taxes on several core American industries — from energy firms to banks to companies trading our products around the world.
The sum of all those taxes is slower growth, fewer jobs, bigger deficits and a poorer country. And as long as the United States has the highest corporate tax rate in the world, global investors will look elsewhere.
But none of this has to happen. Congress and the president can put America on a more promising path.
First, they should act quickly to renew all of the 2001 and 2003 tax cuts and expired or expiring business provisions. Doing this now would boost confidence, ease uncertainty, and reinvigorate our recovery.
Next, they should heed the U.S. Chamber's call for comprehensive tax reform that lowers and synchronizes the individual and corporate rates.
Finally, our political leaders must be straight with the American people on taxes. Perpetuating the myths and playing loose with the facts only moves us further away from the fundamental tax reform we need.
Stop pretending we can lift one group of Americans up by dragging another group down. Stop claiming that the better off are not paying their fair share when, in fact, the top 1 percent of income earners pay 40 percent of federal income taxes while the lower 50 percent of filers don't pay anything at all.
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Instead, let's rally around a positive program to grow our economy and create jobs by promoting trade, energy and innovation while enacting genuine tax, regulatory and entitlement reform to restore our fiscal health.
If we keep making it more expensive to grow and create jobs, we'll have fewer jobs. And if we keep feeding the federal tax beast with ever-increasing amounts of our hard-earned money and with no significant reforms to the system, it will only keep coming back for more.
Thomas J. Donohue is the president and CEO of the U.S. Chamber of Commerce.