Tax Hikes to Start the New Year


Chart.Fair Share of TaxesBy Amy Payne

The Heritage Foundation

While you were sleeping—or ringing in 2013—the Senate voted to raise taxes.

After missing the midnight deadline, Congress and the President have technically sent the nation over the fiscal cliff, meaning higher tax rates are already in effect for all income tax brackets. But the Senate’s deal, brokered by Senate Republican Leader Mitch McConnell (KY) and Vice President Joe Biden, would target the tax increases on those making more than $250,000.

The Senate voted 89-8 to limit deductions for taxpayers making more than $250,000, which would raise their taxes, and to hike tax rates for those making more than $400,000.

As Heritage has pointed out, trying to tax the top income brackets to close the deficit is impossible. To overcome the massive federal deficit, top earners would have to be taxed atmore than 100 percent. And J.D. Foster, Heritage’s Norman B. Ture Senior Fellow in the Economics of Fiscal Policy, reminds us that President Obama has already raised taxes on “the wealthy”:

Never mind that Obama already raised taxes on upper-income taxpayers through the 3.8 percent Medicare surtax imposed under Obamacare. Never mind that tax rate hikes would weaken an economy stumbling so badly the Federal Reserve doubled its risky efforts to keep the economy from recession. Never mind Obama’s approach would likely put the kibosh on any hopes for tax reform. Never mind the resulting revenues would be a small drop in a very big bucket compared to projected budget deficits. Never mind that the only justification for higher taxes is spite and envy to be exercised through the extortive power of the federal government.

Some of the key points in the Senate deal, which could go to the House as early as today:

  • Raises taxes on incomes over $400,000 for individuals and $450,000 for households
  • Raises taxes on investment income for those taxpayers as well
  • Limits tax deductions for incomes over $250,000—raising their taxes, too
  • Increases the death tax rate for estates over $5 million
  • Extends long-term unemployment benefits for one year
  • Postpones sequestration’s automatic spending cuts (including those to defense) by two months

Meanwhile, the United States also ran up against the debt ceiling yesterday. Treasury Secretary Tim Geithner said the Treasury would do some short-term creative accounting to make sure the country doesn’t default on its loans, which will buy two months before lawmakers have to fight it out again over increasing the debt limit.

The deal does nothing to address the reasons that the U.S. budget is out of control. Its focus on tax hikes rather than spending cuts is completely the opposite of what the country needs. As Heritage’s Romina Boccia explains:

Federal spending on entitlements and interest on the debt drives the federal budget crisis. Together the three major entitlements of Social Security, Medicare, and Medicaid (including Obamacare), as well as net interest, make up more than half of all spending in the federal budget today. Their share of the budget will grow to over two-thirds of all spending in 10 years. By 2025, the major entitlement programs and net interest together will eat up all tax revenues collected in that year.

Hiking taxes simply isn’t a solution. Until Congress and the President pursue serious spending cuts, the country and the budget will keep chugging in the same direction. And that’s certainly no cause for celebration.


  1. The continued chanting of Conservative Think Tanks is mind boggling.

    Yes, the Heritage Foundation’s Amy Payne is correct in part, “Hiking taxes simply isn’t a solution,” but either is merely slashing spending. Neither, by itself, is a healthy or effective way to cure what ails our economy. The magnitude of the problem requires and is perfectly amenable to an extended period of time within which to develop thoughtful plans that reform the dysfunctional aspects of U.S. tax code and curb truly wasteful spending as opposed to necessary services and legitimate benefits. Doomsday propaganda and quick fix proposals are not reasonable responses.

    The only rational approach to resolving our fiscal dilemma is a long term bi-partisan commitment to generating increased revenues (yes, this means raising additional tax revenues) and carefully curbing expenditures with an eye to cost savings that don’t cripple vital government programs. A re-examination of defense spending must also be a big part of that process. There is no valid reason that 24% of our national budget should be virtually immune from the same intense scrutiny as Medicare, Pension Benefits and Welfare.

    Finally, the incessant harping on the so-called Debt Ceiling needs to stop. Yes, the national debt is daunting and needs to be confronted; however, the Debt Ceiling is an artificial construct that has only recently been used to inspire fear, encourage brinksmanship and justify legislation by intimidation rather than meaningful debate and compromise. Few citizens realize that the Debt Ceiling has no impact on the rising national debt. It only impairs the ability of the government to pay legitimate obligations that have already been incurred as a result of Congressional action. Refusing to raise the Debt Ceiling is, in fact, a default by the Congress which has already approved the spending.

    It’s time to find a different drummer. This beat is really tiresome.

  2. Thank you, and yes, I do. There are any number of people who belong to this and other conservative groups who feel exactly the same way I do. A very big problem is the way that paid advocates talk about the situations that confront us. They make their money by pitching a point of view. This isn’t just my point of view, it’s exactly what many truly middle Americans have been saying since 2010.

    This article is an example of a rhetorical charade that has played out it’s usefulness. Finally, the time has come to renounce pledges to the likes of Grover Norquist and abandon loyalties Newt Gingrich and his ilk.

    Getting together to find solutions means getting together and that’s something that real life conservatives are as serious about having our elected officials do as I am.

  3. Thank you for your response. I wasn’t clear. I wasn’t referring to conservatives. The “theater” and “drama queens” = theater – the world stage. The “drama queens”- our representatives both sides of the aisle.

  4. Even better, The Washington Post just published a FACT CHECK that proved the deal was probably a major victory for Republicans:

    “The Fact Checker covered the passage of the Bush tax cuts in 2001, which were originally promoted as a way to deal with the looming problem of having too little national debt. (Oops.) The most striking thing is that the deal permanently locks in place virtually all of those tax cuts — something that Democratic leaders had once said would be an economic travesty.

    The Bush tax cut was structured to expire after nine years, in part to hide its true cost, and Democrats declared at the time they would trim it back in future years. In the midst of the economic downturn, Obama extended it for two years, but vowed he would reinstate the top two tax rates that existed in the Clinton administration.

    In the end, he had to settle for just boosting the top tax rate, as well as nibbling around the edges on capital gains, personal exemptions and itemized deductions.

    In other words, Republicans could have framed the vote as a huge victory, achieving a long-sought goal of permanently extending virtually all of Bush’s tax cuts. And Democrats could have viewed the outcome as a giant drain on the deficit — as they once did.”

    And once again, Obama ‘convinced’ his adoring supporters he won a big victory…lololol.


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