Congress has 153 days.
Unless Congress acts in time, on January 1st, 2013 American families and businesses will be facing a tsunami of tax increases – a phenomenon many are calling our nation’s Fiscal Cliff.
Last week, in newspapers across the country, the U.S. Chamber’s Executive VP of Government Affairs, Bruce Josten explained just how damaging it will be if Congress fails to extend the current tax rates, one aspect of this economic predicament:
If the 2001 and 2003 tax rates are allowed to expire at midnight on Dec. 31, we'll witness the largest single tax hike in U.S. history — hitting American taxpayers with $400 billion in new taxes in the first year and $4.5 trillion over the next decade.
Bruce goes on to explain:
•Marginal tax rates will rise, as well as dividends and capital gains taxes. This will squarely hit taxpayers — ranging from the investors who pour capital into job creation to retirees and workers planning for retirement.
•The estate tax will come roaring back to 55 percent, and the exemption threshold will dip from $5 million estates to $1 million -- threatening the livelihood of many small businesses and family farms.
•In addition to the 2001 and 2003 tax rates, relief from the alternative minimum tax will lapse, along with many vital business tax provisions.
And, despite the political rhetoric from those opposing extension of the tax rates, it’s not just the “wealthy” that will be hit. Almost a million successful small and family-owned businesses that file their taxes as pass-through entities will get swept up in the tax hike.
That will mean an increase in the top tax rate from 35 percent to 45 percent for many of these job creators, and that’s not all. On the same day, $1.2 trillion in automatic and untargeted budget cuts are scheduled to take effect.
The ill-designed, across-the-board discretionary spending cuts -- a result of the failed Deficit Supercommittee -- were never intended to take effect. If they do, they will disproportionately cut $500 billion in military spending. What's worse, they will fail to address the real drivers of runaway spending -- massive and growing entitlement programs.
Many economists warn that this dangerous combination of tax hikes and spending cuts, dubbed "the fiscal cliff" in Washington, could drag our economy back into a recession.
The consequences will be severe, but it’s not unstoppable.