FEULNER: A misdeal on tax cuts

Congress still gambling with American economy

Story Topics
Question of the Day

Is it still considered bad form to talk politics during a social gathering?

View results

As tax-cut deals go, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was never a winner.

In fact, it 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 go back up. Such an increase would be “a chilling prospect for the American people.”

Unfortunately, the tax-cut deal has deteriorated since it was announced, as congressional liberals have loaded it with special-interest provisions and vowed still to 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 just 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 held 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.

Consider the rest of this deal, however - and see how the drawbacks pile up.

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 never was indexed to inflation. So over the years, its reach has expanded further and further down the income chain. Now we’ve reached the point where it’s snagging many people 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 lowered gradually until it hit zero percent this year. After Dec. 31, though, it pops back up to 55 percent. With the tax-cut deal, the death tax still would 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.

Making matters worse, the tax-cut deal contains a variety of measures that simply have no place in a tax bill. Let’s see: Section 709 provides for an “energy-efficient appliance credit.” In Section 701, it’s “incentives for biodiesel and renewable diesel.” In Section 744, it’s “special expensing rules for certain film and television productions.” The list goes on. Whose Christmas tree is getting trimmed at taxpayer expense - and why?

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 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 straying 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.

Ed Feulner is president of the Heritage Foundation (heritage.org).

© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.

Comments
blog comments powered by Disqus
TWT Video Picks
You Might Also Like
  • Maureen McDonnell looks on as her husband, former Virginia Gov. Bob McDonnell, made a statement on Tuesday after the couple was indicted on corruption charges. (associated press)

    PRUDEN: Where have the big-time grifters gone?

  • This photo taken Jan. 9, 2014,  shows New Jersey Gov. Chris Christie gesturing as he answers a question during a news conference  at the Statehouse in Trenton.  Christie will propose extending the public school calendar and lengthening the school day in a speech he hopes will help him rebound from an apparent political payback scheme orchestrated by key aides. The early front-runner for the 2016 Republican presidential nomination will make a case Tuesday Jan. 14, 2014, that children who spend more time in school graduate better prepared academically, according to excerpts of his State of the State address obtained by The Associated Press. (AP Photo/Mel Evans)

    BRUCE: Bombastic arrogance or humble determination? Chris Christie’s choice

  • ** FILE ** Secretary of State Hillary Rodham testifies on Capitol Hill in Washington, Wednesday, Jan. 23, 2013, before the Senate Foreign Relations Committee hearing on the deadly September attack on the U.S. diplomatic mission in Benghazi, Libya, that killed Ambassador J. Chris Stevens and three other Americans. (AP Photo/Pablo Martinez Monsivais, File)

    PRUDEN: The question to haunt the West

  • Get Breaking Alerts