As we ring in the New Year, I’d like to take a moment to update you on the so-called “fiscal cliff” and the plan passed by Congress yesterday to avert the cliff and permanently extend tax relief for all Americans.
If nothing were done, the law said that taxes would go up on everyone on January 1 to the tune of more than $3,000 for the average family in Oregon. Millions of middle class families would have been hit by the alternative minimum tax (AMT). Thousands of farmers and ranchers would have been hit by the death tax. Doctors would have seen a 27% cut in Medicare reimbursements, putting care for seniors in jeopardy. Oh, and did I mention milk prices would have doubled as the farm bill expired?
Clearly, something had to be done.
The plan that passed wasn’t perfect—in order to balance the budget, we need to do more to cut spending and grow our economy. But my principle has always been to secure tax relief for the most number of Americans as possible. And yesterday I voted to do that.
The plan that I supported permanently stops a tax increase for 99% of taxpayers and makes permanent nearly 90% of the current tax policy so that families and small businesses can plan for their future. I’ve owned a small business in Oregon with my wife since 1986. I know that families and businesses need certainty about the tax code as they make decisions for coming years. This plan gives them that.
Here are the facts on what the plan does:
- Makes income tax rates permanent for 99% of taxpayers: The plan makes permanent current tax rates for all income up to $400,000 for individuals and $450,000 for married couples. These rates are six brackets at 10%, 15%, 25%, 28%, 33%, and 35%. If nothing were done, the 10% bracket for the lowest-income Americans would have been eliminated, and the rates would have been at 15%, 28%, 31%, 36%, and 39.6%.
- Permanently holds down the death tax: If nothing were done, the death tax would have risen to 55% with a $1 million exemption for 2013. The plan I supported makes permanent a 40% top rate with a $5 million exemption per person. This permanently protects thousands of farmers, ranchers, and family businesses from needing to sell the business or split up the farm to pay the IRS upon the death of a loved one.
- Permanently patches the alternative minimum tax (AMT): If nothing were done, millions of middle class families would have been hit by the AMT this year. This plan permanently indexes and patches the AMT for inflation.
- Holds down capital gains and dividends tax rates: The plan makes permanent 15% top capital gains and dividends rate up to $400,000 for individuals and $450,000 for married couples; 20% rate for both above that threshold. Had we not acted, the top dividend rate would have reached 39.6% and the top capital gains tax rate would have reached 20%.
- Repeals a flawed entitlement program: The plan repeals a flawed new entitlement program created in Obamacare which even the Obama Administration admitted was “totally unsustainable” after the bill was rushed to passage.
- Stops planned Medicare cut for doctors: If nothing were done, health care providers would have seen a 27% reduction in reimbursements from Medicare, forcing many doctors to stop seeing Medicare patients.
- Extends the 2008 farm bill: The plan provides for a one year extension of the 2008 farm bill at no additional cost to the taxpayer. This prevents a doubling of milk prices brought about by the farm bill’s expiration.
I’m frustrated nothing was done to effectively cut spending. It didn’t have to be this way. Earlier this year, the House passed a plan to stop the government from going over the fiscal cliff, and the bills sat for months waiting for the Senate to act.
Now that tax relief has been extended, it’s time for the President to work with Congress to get our nation’s fiscal house in order by addressing the underlying problem, which is spending. The national debt is currently $16 trillion and climbing, over $50,000 for every American. We must cut spending and grow our economy to avoid passing on an even bigger debt burden to our children and grandchildren.