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Obama Plans to Increase Top Two Tax Brackets

By Children’s Home Society of Florida Foundation

On a national media program on July 25, 2010, Treasury Secretary Timothy Geithner emphasized that the Obama administration plans to increase the tax rates for the top two brackets. When asked whether the 2001/2003 tax reductions should be extended for all brackets, Secretary Geithner stated, “I don’t believe they should and I don’t believe they will.”

New Top Rates

In the view of Secretary Geithner, the increase of the top two rates to 36% and 39.6% affects only “2% to 3% of Americans, the highest-earning Americans in the country.” He suggested that the increased rates on top earners will not have a “negative effect on growth.”

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Steny Speaks

House Majority Leader Steny Hoyer (D-MD) agreed with Secretary Geithner. He advocated extending the tax cuts for middle-income taxpayers and remarked that their taxes are “lower than they were in any single year” when compared to prior administrations. However, in his view, the increase in the top two brackets is necessary to keep America from going “deeper into debt.”

So Does Orrin

Sen. Orrin Hatch (R-UT) is a member of the Senate Finance Committee. He spoke on the floor of the Senate and expressed frustration over the decision by Majority Leader Harry Reid (D-NV) to refuse to allow a vote on the Hatch proposal to extend all of the tax cuts. Sen. Hatch offered a motion to commit the pending small business bill back to the Finance Committee in order to amend it and extend all of the tax cuts.

Sen. Hatch indicated that this “largest tax increase in history” will dramatically impact small businesses. These businesses, with between 20 to 500 workers, are owned by individuals who face substantial tax increases.

In the view of Sen. Hatch, the top bracket tax increases will reduce the ability of small business to perform its normal function during an economic recovery of generating 70% of new jobs. Sen. Hatch noted that new jobs typically have three components.

Assessment

First, there must be entrepreneurs who are willing to take risks. Second, there must be adequate access to capital. He indicated that the banks and large companies currently hold record amounts of cash reserves, so there certainly is cash available. Third, there must be “reasonable economic certainly” so that the businesses are willing to expand. With the prospect of higher taxes and greater regulations, Sen. Hatch indicates that there is a high level of uncertainly that is directly reducing job growth in America.

Conclusion

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Filed under: Taxation | Tagged: Finance Committee, income tax, income tax rates, IRS, Orrin Hatch, Steny Hoyer, tax rates, Timothy Geithner | 7 Comments »