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Morning Bell: Tax Hikes to Start the New Year
Posted By Amy Payne On January 1, 2013 @ 9:09 am In Economics | Comments Disabled
While you were sleeping—or ringing in 2013—the Senate voted to raise taxes.
After missing the midnight deadline, Congress and the President have technically sent the nation over the fiscal cliff , meaning higher tax rates are already in effect for all income tax brackets. But the Senate’s deal, brokered by Senate Republican Leader Mitch McConnell (KY) and Vice President Joe Biden, would target the tax increases on those making more than $250,000.
The Senate voted 89-8 to limit deductions for taxpayers making more than $250,000, which would raise their taxes, and to hike tax rates for those making more than $400,000.
As Heritage has pointed out, trying to tax the top income brackets to close the deficit is impossible. To overcome the massive federal deficit, top earners would have to be taxed at more than 100 percent . And J.D. Foster, Heritage’s Norman B. Ture Senior Fellow in the Economics of Fiscal Policy, reminds us that President Obama has already raised taxes on “the wealthy” :
Never mind that Obama already raised taxes on upper-income taxpayers  through the 3.8 percent Medicare surtax imposed under Obamacare. Never mind that tax rate hikes would weaken an economy stumbling so badly the Federal Reserve doubled its risky efforts to keep the economy from recession . Never mind Obama’s approach would likely put the kibosh on any hopes for tax reform. Never mind the resulting revenues would be a small drop in a very big bucket  compared to projected budget deficits. Never mind that the only justification for higher taxes is spite and envy to be exercised through the extortive power of the federal government.
Some of the key points  in the Senate deal, which could go to the House as early as today:
Meanwhile, the United States also ran up against the debt ceiling  yesterday. Treasury Secretary Tim Geithner said the Treasury would do some short-term creative accounting to make sure the country doesn’t default on its loans, which will buy two months before lawmakers have to fight it out again over increasing the debt limit.
The deal does nothing to address the reasons that the U.S. budget is out of control. Its focus on tax hikes rather than spending cuts is completely the opposite of what the country needs. As Heritage’s Romina Boccia explains :
Federal spending on entitlements and interest on the debt drives the federal budget crisis. Together the three major entitlements of Social Security, Medicare, and Medicaid (including Obamacare), as well as net interest, make up more than half of all spending  in the federal budget today. Their share of the budget will grow to over two-thirds of all spending in 10 years. By 2025, the major entitlement programs and net interest together will eat up all tax revenues collected in that year .
Hiking taxes simply isn’t a solution. Until Congress and the President pursue serious spending cuts, the country and the budget will keep chugging in the same direction. And that’s certainly no cause for celebration.
Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2013/01/01/morning-bell-tax-hikes-to-start-the-new-year/
URLs in this post:
 fiscal cliff: http://www.heritage.org/issues/economy/fiscal-cliff
 more than 100 percent: http://www.heritage.org/federalbudget/tax-wealthy-deficits
 President Obama has already raised taxes on “the wealthy”: http://blog.heritage.org/2012/12/17/fiscal-cliff-solutions-soar-over-the-cliff-or-kick-the-can/
 already raised taxes on upper-income taxpayers: http://blog.heritage.org/2012/12/06/obamas-dirty-little-tax-secret-hes-already-raised-taxes-on-the-rich-chart/
 risky efforts to keep the economy from recession: http://blog.heritage.org/2012/12/12/qe4-another-big-step-down-a-dangerous-road/
 a small drop in a very big bucket: http://blog.heritage.org/2012/11/30/fiscal-cliff-will-obama-stop-kicking-the-can-down-the-road-on-entitlements/
 key points: http://www.latimes.com/news/nationworld/nation/la-naw-fiscal-cliff-20130101,0,6338689.story
 debt ceiling: http://www.dailyfinance.com/2012/12/31/us-borrowing-limit-debt-ceiling-default/
 explains: http://blog.heritage.org/2012/12/26/chart-of-the-year-2012-entitlements-and-interest-drive-the-fiscal-crisis/
 more than half of all spending: http://www.heritage.org/research/reports/2012/10/federal-spending-by-the-numbers-2012
 fiscal cliff deal: http://www.forbes.com/sites/rickungar/2013/01/01/heres-the-deal-on-the-fiscal-cliff-deal/
 faults the State Department: http://www.foxnews.com/politics/2012/12/30/latest-senate-committee-report-on-benghazi-terrorist-attack-faults-state/
 blood clot near her brain: http://www.nytimes.com/2012/12/31/us/hillary-clinton-goes-to-hospital-after-exam-finds-a-blood-clot.html?hp&_r=0
 missile tests: http://www.myfoxdc.com/story/20472047/iran-test-fires-missiles-near-strait-of-hormuz#axzz2GjL9fajF
 Obamacare’s HHS mandate: http://blog.heritage.org/2013/01/01/beware-obamacares-looming-conscience-cliff/
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