Even if Congress does nothing, tax hikes will hit hard a year from now, says Pete du Pont, Chairman of the National Center for Policy Analysis and a former Governor of Delaware.
The estate tax, which fell to zero this year, will return, the top personal income tax rate will rise from 35 to 39.6 percent, the dividend tax rate will go from 15 to 39.6 percent and the capital gains tax rate will rise from 15 to 20 percent.
“If the House health care bill had passed, all three of these rates would have risen to 45 percent,” Du Pont writes in The Wall Street Journal.
Moreover, many of last year's tax deductions have disappeared due to the failure of Congress to extend them into this year, including deductions for state and local sales taxes, college tuition and fees, and the 50 percent small business write-off for capital purchases.
“Add in the biggest government deficits and spending increases in half a century, the protectionism of free trade downsizing through the ‘buy American’ requirements, China import restrictions, and the administration limitations of Colombia, South Korea, and Panama free trade agreements, and we have a very different, and not very prosperous, America ahead of us,” Du Pont observes.
Du Pont suspects that worries about government spending, markets and tax increases may well fuel a replay of the 1994 voter revolt.
“That led to a Democratic presidency and a Republican Congress, which together were better for the American people than the full-scale liberalism we see in the current administration,” Du Pont says.
Microsoft founder Bill Gates says that tax increases are needed to balance the federal budget.
"The budget is very, very out of balance," Gates told ABC. “Without changes in taxes or entitlement policies, it won't get back into balance.”
“Taxes are going to have to go up and entitlements are going to have to be moderated."
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