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Monday, February 18 , 2019, 9:33 pm | Fair 50º


Tom Donohue: Extend Tax Relief to Revive the Economy

If taxes go up, things could get much worse for American families and businesses

The remainder of the 111th U.S. Congress will be largely defined by one issue: taxes.

Tom Donohue
Tom Donohue

With the 2001 and 2003 tax cuts set to expire at the end of the year, Americans are facing the largest tax hike in history. If Congress acts to prevent these tax increases, the economy will receive a much-needed injection of certainty. But if Congress lets tax relief lapse, 2011 will be another difficult year for American families and businesses.

Let’s examine the implications of this pending tax hike. Marginal income tax rates would increase for every taxpayer. The capital gains tax rate would climb 33 percent. Dividend rates for stockholders would jump by as much as 164 percent. The child tax credit would be cut in half, and the marriage penalty would return.

Small businesses — our job creators — would be among those hardest hit by these tax increases. The top marginal income tax rate would grow to 39.6 percent from 35 percent. Compound that with the loss of certain itemized deductions and personal exemptions, and small businesses would face rates as high as 41.6 percent. Successful small businesses would be hit particularly hard — about half of the business income reported on tax returns in 2011 would be subject to the top two marginal rates.

For companies that employ Americans and keep our economy moving, raising dividend rates could discourage investment. Further, it could incentivize companies to use excessive debt financing, causing greater economic instability. All taxpayers who receive dividends, regardless of income level, could be hurt by potential lower dividend payouts.

Our economy is stumbling on the road to recovery. Nearly 1 in 10 Americans can’t find work. If you include those who have given up looking or have settled for part-time work, that number jumps to nearly 1 in 5.

Things are bad, but if taxes go up they could get much worse.

Congress must act now to prevent this tax increase. By preserving current rates, lawmakers would boost investor, business and consumer confidence by removing growth-killing uncertainty from tax policy. With more of their earnings available — and a better sense of what the future will bring — businesses and individuals would be able to make the purchases and investments that drive economic growth and create jobs.

If Congress does only one more thing before it adjourns this year, it must extend the tax relief passed in 2001 and 2003. By giving the business community tax certainty, Washington would be casting a vote of confidence for the economic prospects of the nation.

— Tom Donohue is president and CEO of the U.S. Chamber of Commerce.

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