Economic Watch: Congress Should Do Two-Step in Tackling Tax Policy
Byline: J.D. Foster, SPECIAL TO THE WASHINGTON TIMES
'Fiscal cliff " Taxmageddon." Whatever you call it, it's really bad - and it's looming over America's economy and its taxpayers.
Slated to arrive Jan. 1, the nearly $500 billion tax hike is so massive that it has brought about what many regarded as impossible: consensus. There is broad agreement that most of this tax hike must be prevented. The debate is really only about how much and when.
At the same time, there is a growing consensus in favor of tax reform. Both President Obama and presumptive Republican nominee Mitt Romney have called for reducing corporate income tax rates substantially. With such an obvious need, many members of Congress are frustrated with the lack of progress on tax reform.
Many also express a reluctance to prevent Taxmageddon without tax reform, suggesting that doing so smacks of once again kicking the can down the road. While these frustrations are understandable, nevertheless, as matters stand, the correct two-step sequencing legislators should embrace is to prevent all tax increases now while working for tax reform in 2013.
Step One: Preventing Taxmageddon
On Jan. 1, among other unfortunate tax consequences, income tax rates shoot up, the child credit is cut in half, taxes on saving shoot up, the payroll tax shoots up, and much, much more. Collectively, this would by far be the largest tax increase in history. The effects on families and businesses would be devastating; the effects on the economy no less so.
Congress should make current tax policy permanent and eliminate, once and for all, this cavalcade of tax increases. At the same time, Congress should repeal Obamacare and in the process eliminate its own panoply of harmful taxes. In the event it does neither, Congress should delay these higher taxes for as long as possible, whether one year, two years or longer.
Nor should Congress wait until after the election to act. Taxpayers deserve more respect from their elected officials than leaving them in doubt about facing a massive tax increases. The economy also needs better tax certainty. And on this issue voters should be able to cast their votes in November based not on what members say they will do, but on what they did before the election.
Also, without question Congress should not kick the can down the road into early 2013, much as it did with the payroll tax hike prevention enacted late last year. …