Are We Being Taxed to Death? – with David Asman

This week, the FOX Business Network (NWSA) is exploring whether we’re being “Taxed to Death”. I caught up with co-host David Asman to hear what he learned while researching for this special series …

Damien Hoffman: David, experts disagree over how the Bush Tax cut expiration will affect us. What have you learned during your reporting?

David Asman: Several things. What the President is proposing will not merely increase taxes on the rich. Taxes will go up on virtually all taxpayers. The AP just reported that a family with a household income of $50,000 will have to pay $2,900 more in taxes in 2011 (the study on which this figure is based was done by the tax consulting firm Deloitte Tax LLP).

The Bush tax cuts enacted almost 10 years ago affected ALL tax brackets—from the poor to the rich—and not just on the basis of your salaried income. Tax breaks on day care, tuition, and income from capital gains and dividends was also affected. And, of course, big changes in the estate tax (sometimes called “the death tax). All these breaks will either disappear or be phased down over the next couple of years unless something is done.

All President Obama has promised is to keep the middle class tax on income where it is. That’s not an “Obama tax cut on the middle class.” It’s continuing the tax rates that were cut by Bush. Many other taxes will be going up—on everyone.

Damien: What are the most realistic alternatives to ending the Bush Tax cuts? Can you get a feel for what would be the most likely winner should we go that route?

David: Realism inside the Beltway is that they will just continue to spend and spend, which means that our deficit will just continue to rise.

We just passed another $30 billion “small business” package this week to stir loans to small businesses, when most small businesses are hoarding cash in anticipation of higher taxes and more costs in health care for employees. And the President is now asking Congress to attach an extra $20 billion in spending to an emergency spending bill that the Congress needs to pass to keep the government in operation.

This tactic is essentially an end run around normal Congressional spending. But it allows the Administration to squeeze even more funds out of the Treasury for things it claimed wouldn’t cost any more money….like beefing up the Treasury Department and the SEC with more bureaucrats as a result of passing the new Financial Regulation law…or spending more government money training doctors and nurses because of the new health care law. Things that the administration said would never cost any more money are already costing more money. It’ll never stop…you just have to starve the beast by preventing a tax increase of any kind and find a way of preventing them from borrowing more.

Damien: Assuming the Republicans or Tea Party take some seats in the November elections, what tax policies are you anticipating in 2011?

David: Speaker Pelosi is already beginning to bend on the issue of taxes, so she may not resist attempts to extend the Bush tax cuts. However, the ideological fervor of the President is very strong, and he seems unwilling to deal. Therefore, we may see presidential vetoes of any attempt to extend Bush tax cuts for another year or so.

This would mean an immediate increase in the top rate, which will affect hundreds of thousands of unincorporated small business owners, who take their companies profits as income. Unlike other expenses, higher taxes is an expense that cannot be deducted…it is a bottom line expense: taking money directly out of a company’s bottom line, from which companies take money to hire new workers. In other words, this will kill job creation.

That’s the gloomy picture. A more optimistic picture is that the elections scare Congress so much they develop the will to override a presidential veto on tax increases. That would take even more major defections among the so-called “blue dog” Democrats than we’ve already seen, but it could happen.

The best would be if the President concedes that for the sake of jobs, he will go along with leaving tax rates as they are for the next year or so, though indications are that would take a conversion on par with Moses deciding that maybe he’ll take his people back to Egypt.

Damien: Thanks for sharing your thoughts, David.

David: My pleasure.

You can catch the “Taxed to Death” special series on Fox Business Network Monday, September 20th through Friday, September 24th, 2010 11am-4pm and 1pm-2pm ET.