Most people do not know that already enacted in current law for 2013 are increases in the top tax rates of virtually every major federal tax.
That is because the tax increases of Obamacare become effective that year, and the Bush tax cuts expire. President Obama has refused to renew these cuts for the nation’s small businesses, job creators and investors.
As a result, if the Bush tax cuts expire just for singles making more than $200,000 per year, and couples making more than $250,000, in 2013 the top two income tax rates will jump nearly 20 percent, the capital gains tax rate will soar by nearly 60 percent, the tax on corporate dividends will nearly triple, and the Medicare payroll tax will leap by 62 percent for those disfavored taxpayers.
This is on top of the U.S. corporate income tax rate, which is virtually the highest in the industrialized world. The federal rate is 35 percent, with state corporate rates taking it close to 40 percent on average.
But even communist China has a 25 percent rate. The average rate in the heavily socialist European Union is less than that. Formerly socialist Canada has a 16.5 percent rate, going down to 15 percent next year.
The U.S. corporate tax rates leave American companies uncompetitive in the global economy. Yet under Obama there is no relief in sight. Instead, he continually proposes still further tax increases on American business.
Indeed, Obama is already campaigning all over America for still further tax increases, on top if his 2013 increases.
In addition, the blizzard of new regulatory costs and barriers imposed by Obama will be building to a crescendo by 2013 as well. The Environmental Protection Agency is effectively imposing cap and trade by administrative regulation under the Clean Air Act, without congressional approval.
The EPA is joining with the Interior Department to leash the private sector from traditional American energy production, rather than unleash it as Reagan did. The new regulatory burdens from Dodd-Frank are scheduled to flow as well.
So are the regulatory burdens of Obamacare, including the employer mandate, which is already massacring jobs with a future requirement that employers buy the most expensive employee health insurance possible.
Then there is the Fed and the effects of its monetary policy. When the Fed follows a typical pattern of cutting off its monetary crack right after the election to forestall inflation, that will be contractionary as well. In fact, Obamanomics involves the exact opposite of Reaganomics in every fine detail.
That is why it is having the exact opposite results. Economist Art Laffer predicted the “Coming Crash of 2011” on the basis of the expiration of the Bush tax cuts on the upper-income earners alone.
Those tax rate increases were extended to 2013 in December 2010, out of fear that Laffer’s prediction was right. But now, in 2013, in addition to those tax rate increases, we have all of the tax increases of Obamacare, the further exploding costs of Obama’s building regulatory blizzard, and the contractionary effect of the Fed’s monetary policies, all at the same time.
Unless we reverse course, the result will be one big, bad crash in 2013, quite analogous to the double dip of 1937.
But none of this has to be. America is not in some permanent decline. It is being trashed by bad policies. If those policies are reversed and replaced by pro-growth, free-market principles, the American economy can be booming again within a year.
Peter Ferrara, J.D., is a senior fellow at The Heartland Institute and an advisor for entitlement reform and budget policy at the National Tax Limitation Foundation.
