Largest US Tax Increase In History Looms, White House Warns

by Mike Godfrey, Tax-News.com, Washington

02 June 2008

Democrats in Congress have signalled their support for the largest tax hike in US history by refusing to extend President Bush's tax relief, according to the White House.

In a statement released on the anniversary of Bush's 2003 tax relief package, the White House argued that US taxpayers faced a collective tax increase of USD280bn per year if Congress failed to extend these temporary tax cuts, which are due to expire at the end of 2010.

The White House argued that the failure of the currently Democrat-controlled Congress to act in this regard will mean that in 2011: personal income tax breaks nitigating the so-called marriage penalty will come to an end in 2011; the 'death tax' will jump back to pre-tax cut levels; the tax rate on dividends will return to a maximum of 39.6%; and the top tax rate on long-term capital gains will climb from 15% to 20%.

The Bush administration claims that Americans would have paid an additional USD$1.3 trillion in taxes by the end of last year if it wasn't for the tax relief packages passed in 2001 as well as 2003.

By letting the tax relief expire, the White House has calculated that 116 million families will see their taxes go up by an average of USD1,800, with many families forced to accept tax increases approaching 200%.

Moreover, it warned that 27 million small business owners who have benefited from personal income and investment tax cuts will face an average tax increase of more than USD4,000.

"Nearly 75% of the taxpayers who benefit from the reduction in the top rate are small business owners," the statement observed.

"The looming tax increases are affecting today's economy by creating uncertainty, which causes small businesses to think twice about expanding or hiring new workers. These tax increases will harm economic growth by taking more money from small business owners and sending it to politicians in Washington."

These sentiments were echoed by President Bush, who was visiting the Silverado Cable Company in Mesa, Arizona, on the same day.

"A company such as this one pays taxes at the individual income tax rate. So when you hear these politicians campaign and say, 'We're going to raise taxes, oh, just on the rich people, they're raising taxes on companies like Silverado," he told a press conference.

"And so I strongly urge the United States Congress to make the tax relief we passed permanent so that companies such as Silverado don't have to worry about what their tax burden is going to be in two years come," he concluded.

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