As tax-cut deals go, the “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010” was never a winner.
In fact, it really had only one thing in its favor: extending the 2001 and 2003 tax cuts, which are set to expire at the end of this month. Tax relief, of course, is just what our struggling economy needs -- now. As President Obama said, it would be “a grave injustice” to let taxes to go back up. Such a hike would be “a chilling prospect for the American people.”
Unfortunately, the tax-cut deal has deteriorated since it was first announced, with congressional liberals loading it with special-interest provisions and vowing to still raise taxes on the hated “rich.” It has morphed from an agreement that conservatives could begrudgingly accept to an unholy mess that no one who cares about America’s financial health can support.
Even a clean deal that offered temporary tax relief would be no great shake. Better than nothing? Sure. But extending it for only two years would mean that 1) we’d likely be back here in just 24 months, engaging in the usual political horse-trading, while the productive sector of our economy holds its breath, and 2) the atmosphere of uncertainly would continue to cloud our economy.
Businesses in a free society need one thing above everything else if they’re to thrive: certainty. If they don’t know whether taxes are going up in the near future, they hedge their bets. They delay buying new equipment. They hire fewer people. It’s bad enough when a few businesses do it. But multiplied across the sprawling American economy, this trend drags us down. Unemployment stays high, investment dries up. Recovery remains elusive.
Lawmakers included a two-year patch of the Alternative Minimum Tax (AMT). They should just repeal it altogether. This is long overdue. The AMT was enacted in 1969 to keep a select group of very wealthy people from paying no tax whatsoever. Yet it was never indexed to inflation. So over the years, its reach has expanded further and further down the income chain. Now we’re reached the point where it’s snagging many individuals who are nowhere near being millionaires, and forcing them to pay a higher rate. We need to fix this for good, not for just a little while.
Consider, too, what the deal would do to the death tax. Under current law, the tax has been gradually lowered until it hit 0 percent this year. After Dec. 31, though, it pops back up to 55 percent. With the tax-cut deal, the death tax would still be, ahem, resuscitated, but up to 35 percent instead, and certain other exemptions would be carved out. This doesn’t give the relief that small businesses, farms and others need -- the kind of relief they’d get from a permanent repeal of the death tax. It’s time to kill it once and for all.
Finally, the tax-cut deal provides a costly extension of unemployment insurance. How will it be paid for? The deal doesn’t say.
The tax-cut deal, as it now stands, will add to our already disastrous long-term fiscal problem by adding billions more in spending. None of it belongs in a “tax bill.” And while the deal represents progress, we’re still distressing far from the kind of tax relief needed to light a real fire under the rocket that is the American economy.
We need a straight up-or-down vote on full extension, including the AMT. Come on, Congress. Stop playing chicken with America’s future.