A
couple weeks ago we talked about the “fiscal
cliff” our country faces on January 1, 2013 when the 2001 and 2003
tax cuts expire. The Joint Committee on Taxation (JCT)
estimates that the cliff will cost taxpayers $384 billion in 2013 alone and
more than $4 trillion over the next decade. In addition to the tax
rate for each income bracket increasing, the marriage penalty would
be reinstated, the child credit cut in half, the death tax would
balloon to 55 percent, and your savings and investments would face as much
as double the current tax rate. Read more about the breakdown of
the tax increases looming ahead here on the
House Ways and Means Committee
website.
This is bad news for American households of all types. The typical tax returns below show how this would affect a family of four, a single parent, and married seniors.
This not only spells out disaster for American households of all types, sizes and ages, but also for all the small businesses – the engine of economic growth – that are taxed as individuals. With fears of a double-dip recession, there is no room for these devastating tax hikes.
Therefore, this week the House voted on the Job Protection and Recession Prevention Act to extend the current tax rates to 2014 so that you will not have to worry about the federal government taking more of your paycheck at a time when Americans have enough to worry about: underwater mortgages, diminishing college and retirement savings accounts, persistently high underemployment and unemployment, and the rising cost of food and energy, among other concerns. I voted for this bill which passed in the House by a vote of 256-171.
I voted for this one year extension because I know it’s not adequate to extend the status quo indefinitely. In light of the deficit and perceived inequality, there have been calls from the President and from some of you for higher taxes on those earning more than $200,000 a year. The problem – contrary to what some may say – is not that the tax rate is too low for these earners; in fact, according to the AP, the top income tax bracket is 35 percent and the top 10 percent of earners pay more than 70 percent of all federal income taxes. The problem in the tax code – aside from the much larger problem in our government’s out-of-control spending – is that some of the well-connected and often wealthy use loopholes to avoid paying taxes. These loopholes are disproportionately available to the rich and need to be closed. We must make our tax code fair, simple, and competitive for everyone. This will mean increasing revenues by closing loopholes and lowering tax rates for all income earners. That’s why this week the House also voted on the Pathway to Job Creation through a Simpler, Fairer Tax Code Act.
This bill would lay the foundation for comprehensive tax reform in the 113th Congress that consolidates the six current individual income tax brackets into two brackets of 10 and 25 percent, reduces the corporate income tax rate to not more than 25 percent, repeals the alternative minimum tax (AMT), and broadens the tax base so that tax revenues comprise between 18 and 19 percent of Gross Domestic Product (GDP).
Our economy is hemorrhaging. While extending the 2001 and 2003 tax reductions is a necessary tourniquet to prevent a reckless drive headlong over the fiscal cliff, comprehensive tax reform will be necessary for a full recovery. The House’s action this week addresses both the short-term danger and the long-term problem.
Sincerely,
Daniel E. Lungren
Member of Congress
This is bad news for American households of all types. The typical tax returns below show how this would affect a family of four, a single parent, and married seniors.
This not only spells out disaster for American households of all types, sizes and ages, but also for all the small businesses – the engine of economic growth – that are taxed as individuals. With fears of a double-dip recession, there is no room for these devastating tax hikes.
Therefore, this week the House voted on the Job Protection and Recession Prevention Act to extend the current tax rates to 2014 so that you will not have to worry about the federal government taking more of your paycheck at a time when Americans have enough to worry about: underwater mortgages, diminishing college and retirement savings accounts, persistently high underemployment and unemployment, and the rising cost of food and energy, among other concerns. I voted for this bill which passed in the House by a vote of 256-171.
I voted for this one year extension because I know it’s not adequate to extend the status quo indefinitely. In light of the deficit and perceived inequality, there have been calls from the President and from some of you for higher taxes on those earning more than $200,000 a year. The problem – contrary to what some may say – is not that the tax rate is too low for these earners; in fact, according to the AP, the top income tax bracket is 35 percent and the top 10 percent of earners pay more than 70 percent of all federal income taxes. The problem in the tax code – aside from the much larger problem in our government’s out-of-control spending – is that some of the well-connected and often wealthy use loopholes to avoid paying taxes. These loopholes are disproportionately available to the rich and need to be closed. We must make our tax code fair, simple, and competitive for everyone. This will mean increasing revenues by closing loopholes and lowering tax rates for all income earners. That’s why this week the House also voted on the Pathway to Job Creation through a Simpler, Fairer Tax Code Act.
This bill would lay the foundation for comprehensive tax reform in the 113th Congress that consolidates the six current individual income tax brackets into two brackets of 10 and 25 percent, reduces the corporate income tax rate to not more than 25 percent, repeals the alternative minimum tax (AMT), and broadens the tax base so that tax revenues comprise between 18 and 19 percent of Gross Domestic Product (GDP).
Our economy is hemorrhaging. While extending the 2001 and 2003 tax reductions is a necessary tourniquet to prevent a reckless drive headlong over the fiscal cliff, comprehensive tax reform will be necessary for a full recovery. The House’s action this week addresses both the short-term danger and the long-term problem.
Sincerely,
Daniel E. Lungren
Member of Congress
Typical Tax Return #1: Low-Middle Income Family of Four
with One Earner
Filing status: Married filing joint return
Children: 2
Adjusted gross income: $50,000
Filing status: Married filing joint return
Children: 2
Adjusted gross income: $50,000
|
2013
Without Tax Hike |
2013
With Tax Hike |
|
|
Standard
deduction |
$12,100
|
$10,150
|
|
Personal
exemptions |
$15,400
|
$15,400
|
|
Taxable
income |
$22,500
|
$24,450
|
|
Tax on taxable
income |
$2,485
|
$3,668
|
|
Child credit (non-refundable
portion) |
$2,000
|
$1,000
|
|
EITC |
$0
|
$0
|
|
Additional child
credit |
$0
|
$0
|
|
Tax liability |
$485
|
$2,668
|
|
2013 Tax
Increase: $2,183
|
||
Typical Tax
Return #2: Low Income Single Parent
Filing status: Head of Household
Children: 1
Adjusted gross income: $36,000
Filing status: Head of Household
Children: 1
Adjusted gross income: $36,000
|
|
2013
Without Tax Hike |
2013
With Tax Hike |
|
Standard
deduction |
$8,900
|
$8,900
|
|
Personal
exemptions |
$7,700
|
$7,700
|
|
Taxable
income |
$19,400
|
$19,400
|
|
Tax on
taxable income |
$2,275
|
$2,910
|
|
Child credit (non-refundable
portion) |
$1,000
|
$500
|
|
EITC |
$0
|
$0
|
|
Additional child
credit |
$0
|
$0
|
|
Tax liability |
$1,275
|
$2,410
|
|
2013 Tax Increase:
$1,135
|
||
Typical
Tax Return #3: Married Seniors
Filing status: Married filing joint return
Children: 0
Adjusted gross income: $40,000 including $5,000 on dividends
($100,000 invested, 5 percent yield)
Filing status: Married filing joint return
Children: 0
Adjusted gross income: $40,000 including $5,000 on dividends
($100,000 invested, 5 percent yield)
|
|
2013
Without Tax Hike |
2013
With Tax Hike |
|
Standard
deduction |
$14,500
|
$12,550
|
|
Personal exemptions |
$7,700
|
$7,700
|
|
Taxable non-dividend
income |
$12,800
|
$14,750
|
|
Tax on non-dividend income |
$1,280
($12,800 taxed at 10 percent rate) |
$2,213
($14,750 taxed at 15 percent rate) |
|
Qualified
dividends |
$5,000
|
$5,000
|
|
Tax on dividend
income |
$0
($5,000 taxed at special 0 percent rate for taxpayers in the 10 percent or 15 percent brackets) |
$750
($5,000 taxed at 15 percent ordinary income rate) |
|
Tax liability |
$1,280
|
$2,963
|
|
2013 tax increase:
$1,683
|
||
Calculations are based on Joint Committee on
Taxation (JCT) estimates of various
tax parameters reflecting expected inflation adjustments for 2013.
tax parameters reflecting expected inflation adjustments for 2013.
