Brace Yourself For January 1, 2011

Today’s Washington Examiner posted a report on the coming tax increases of January 1. The tax increases will kick in due to the expiration on the Bush tax cuts.  At this point I would like to mention that the Bush tax cuts expire because President Bush did not have a filibuster-proof Congress at any time that he was in office, and thus was not able to make his tax cuts permanent.  The Democrat party is still spinning those tax cuts as ‘tax cuts for the rich’ that increased the deficit.  The tax cuts did no such thing–the increased spending that began in 2006 when the Democrats took over Congress increased the deficit.  It would have been nice if President Bush had vetoed some of the spending, but he didn’t, and the deficit grew (although nothing like what it has grown in the past eighteen months).

Investor’s Business Daily reports that everyone who pays taxes will see a tax increase on January 1, 2011.  Even the 10 percent bracket will increase to 15 percent.  Capital gains will increase from 15 to 20 percent.  Dividend income will go from being taxed at 15 percent to a 39.6 percent tax rate.  The increased taxes on capital gains and dividends not only discourage investment (which creates jobs), but impact senior citizens who depend on dividends for their income. 

The inheritance tax will be 55 percent for an estate valued at $1 million or more.  If you live in a state with high real estate values, that is not a very high number.  In New York, California, or Massachusetts, that is a house, two cars, and a small investment portfolio (or 401K). 

Senator Jim DeMint, (Republican-S.C.) proposed an amendment last week to end the death tax.  That amendment would have created an estimated 1.5 million new jobs (according to the American Family Business Foundation).  Unfortunately, the Democrats voted down the amendment. 

The article concludes:

All of the foregoing reminds us of President Reagan’s wise maxim: “Our problem is not that the American people don’t pay enough in taxes, it’s that the government spends too much.”

We need a new Ronald Reagan to provide common sense at this time.