When Congress returns to Washington in September, it needs to do more than hold a few political posturing votes before going home to campaign. Even if a continuing resolution to fund government is passed as expected, there are still serious unresolved issues that should not be left for an unaccountable lame-duck session. Not only should Congress act to avert the toxic brew of tax hikes coming at the end of the year, but it should also act to check lame-duck regulatory abuses by the Obama administration.
A massive $494 billion tax hike is coming on January 1. Reversing the Bush tax cuts amounts to a $166 billion tax hike including higher income tax rates, smaller child credits, and the return of the marriage tax penalty. The end of Obama’s payroll tax holiday will pile another $125 billion on everyone who works. The Alternative Minimum Tax will slam millions of middle-class families to the tune of another $119 billion. The death tax will jump from 35 percent of everything above $5 million to a whopping 55 percent of everything above $1 million at a cost of $13 billion. Other expiring tax cuts will total about $50 billion, and new tax hikes from Obama’s health care law will add another $22 billion.
These are not the usual ten-year estimates used in policy debates. These are one-year, immediate 2013 tax hikes that total an astonishing $494 billion. More than enough to tip the U.S. economy back into recession, perhaps sharply so.
Economist Don Luskin projects that the dividend tax hike alone – slated to go from 15 percent to 43.4 percent with the expiration of the Bush tax cuts and the new Obama health care surtax – could knock 30 percent off the stock market. Seniors who rely on dividend income will be hit especially hard.
Tax hikes of such a frightening size are never a good idea, but are especially foolish in what’s now widely recognized as the weakest economic recovery in the post-war period. Democrats should drop their class-warfare stance that insists on holding the U.S. economy hostage over tax hikes for upper income earners and business owners and agree to stop all of these tax hikes for at least one year.
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The regulatory threats in a lame duck period are similarly frightening, starting with a pending greenhouse gas regulation that would effectively prohibit new coal-fired power plants and create the predicate for litigation that would shut down existing coal plants, cementing as Obama’s legacy his promise to bankrupt coal and make electricity prices skyrocket.
There are also several onerous financial rules pending pursuant to Dodd-Frank. The Labor Department has been working on a rule that would significantly increase the cost of retirement planning. The Department of Transportation has a rule pending to require rear-view cameras in all cars and trucks that would cost billions, and another to require airplane-like “black boxes” that would potentially make available to the government every detail of Americans’ driving habits. The FCC just announced a pending rule, called “special access,” to impose price regulation on a part of business broadband delivery.
Those are a small sample of the known regulatory threats. There are also many unknown regulations that could be pushed out the door by a frantic outgoing Obama administration. This is, after all, a president who has elevated bypassing Congress to a virtue, bragging about how he won’t wait for Congress on everything from global warming to immigration.
Rep. Reid Ribble and Sen. Ron Johnson, both of Wisconsin, have introduced legislation that would prohibit economically significant lame-duck regulations absent a national emergency. Rules that have been delayed to avoid having to defend them on the campaign trail should not be allowed to take effect after the election. Their Midnight Rule Relief Act should be passed by both chambers in September to protect the economy from looming regulatory threats.
With our economy continue to suffer, it would be wonderful if Congress could come together on positive pro-growth reforms to get people back to work. Unfortunately, the best we can probably hope for is for Congress to continue current policies by rejecting big new spending bills, canceling all the tax hikes, and blocking regulatory threats to economic growth. And Congress should address these issues in September, under the watchful eyes of voters, not in an unaccountable lame duck session after the election.
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