Thompson Votes to Prevent Largest Tax Increase in History, Extends Tax Relief to All Americans

Washington, D.C. -

December 17, 2010

Economists differ on how to stimulate the economy and move the country back into job-creating prosperity. But most agree that raising taxes in a poor economy is a bad idea and does not lead to job creation.



If the House and Senate had not acted the week before Christmas, on January 1st, your tax rates would have reverted to the high rates in effect back in 2001. An average middle-income family would have their taxes go up by $1,540. Even the lowest income bracket taxpayers, 88 million Americans, would have received, at minimum, a tax increase of $503. Unfortunately, there are too many people who could not have absorbed such costs.



In total, taxes would have gone up $3.9 trillion over the next ten years—a job-killing increase. Now, there is a two-year reprieve.



What was at stake?



Without the vote:

* The death tax would have increased to a rate of 55 percent with a low exemption amount of $1 million. Under the new package the tax will be a flat rate of 35 percent with an exemption of $5 million per person.
* The Alternative Minimum Tax would have been extended to 15 million taxpayers.
* The tax rate on capital gains would have risen from 15 percent to 20 percent. The tax rates on dividends would have risen from 15 percent to being taxed as ordinary income.
* The “1603 Renewable Energy Grants” would have expired.

The legislation also extended unemployment benefits at their current level for 13 months. Everyone agrees that the jobless need this assistance. But, as I have said before, if it is important enough to do, it is important enough to pay for it. Unfortunately, there was no money in the bill to pay for this extension.



In addition the payroll tax holiday provides less revenue to the Social Security program. The Democrats insisted on an employee-side payroll tax cut of about two percent. The deduction goes from 6.2 percent to 4.2 percent of income, which for a household making $50,000 (median for PA) a year, means a savings of $1,000. That equals about $112 billion next year that will not be going into the Social Security program.



Although I objected to both of these provisions, I supported the entire package with the knowledge that the Senate and the Presidency are still controlled by the Democrats.