Letter
NTU's Open Letter to Congress on the Tax Cut Negotiations
December 9, 2010
By Andrew Moylan
Dear Member of Congress:
On
behalf of the 362,000 members of the National Taxpayers Union (NTU), I write to
express our views on the recently-announced framework of agreement between
President Obama and some Congressional leaders to extend the 2001 and 2003 tax
rates. While we have serious reservations about portions of the package, some
of which we have opposed outright in the past, it is NTU’s belief that on balance
this compromise avoids disaster; further, it represents a preferable
alternative to inaction or to other proposals that would force some Americans
to pay higher income taxes. This deal is
far from perfect, but preventing a devastating tax hike in the face of an
anemic recovery is too important to dismiss the package out of hand.
On
the beneficial side, this compromise would ensure that no American would face a
hike in their marginal tax rates next year. It would extend all of the 2001 and
2003 tax rates for two more years and avert an explosion of the Alternative
Minimum Tax (AMT), while also introducing a cut in the employee portion of the
payroll tax of two percentage points and full business expensing of equipment.
Taken together, these pro-growth measures will help prevent a slide in the
confidence individuals and businesses need to invest.
The
detrimental side of the deal is considerable. First and foremost, it fails to
make lower tax rates permanent and put an end to the economic uncertainty (not
to mention the political bickering) associated with potential hikes. The
extension of lower income and investment tax rates lasts for two years, while
the AMT patch, payroll tax cut, and business expensing last only one, meaning
that most taxpayers will again be left in financial limbo by 2012. It also resurrects
the currently-defunct “death tax,” an immoral and economically damaging policy,
at a rate of 35 percent with a $5 million exemption. Finally, it adds
substantial amounts to federal spending (without program reductions elsewhere)
in the form of extended unemployment benefits and some refundable tax credits. These
are policies that NTU always has and will continue to oppose because they serve
to expand the size and scope of our bloated federal government.
Congress
has once more shredded its credibility by waiting until the eleventh hour to
act, only to do so by providing short-term relief. ”Kicking the can down the
road” is a less fitting analogy than gently nudging that can over the curb.
This is but the latest example of how Congress continues to be distracted from
completing in a timely manner its core constitutional duties, like deciding
appropriate levels of taxation and funding the government with proper restraint.
The
ineptitude of Congress aside, NTU’s analysis suggests that this package is a
modest step forward. The tax relief significantly outweighs the hikes and new
spending, while the political balance in Congress is such that a more fiscally
conservative package is exceedingly unlikely. If the details of this compromise
change, so will NTU’s stance, and you can expect further correspondence as
votes draw nearer. As it stands, NTU believes the current tax cut compromise
will lead to an acceptable outcome for taxpayers, and roll call votes in favor
of the package will reflect that view in our annual Rating of Congress. Votes
on amendments or alternatives to this plan – good or bad – will likewise be
included in the Rating.
Sincerely,
Andrew Moylan
Director of Government Affairs
PDF
