Earlier this week, Congressman Peter Roskam (R-IL) introduced a new piece of tax legislation called The Tax Hike Prevention & Business Certainty Act. I asked him what this bill would do and what kind of impact this would have on businesses and the american taxpayer.
Rep. Roskam: The Tax Hike Prevention & Business Certainty Act would permanently set the Capital Gains and Dividend Tax Rates at the current 15% to avoid an impending tax hike on American businesses, seniors, and investors of all sizes. The new 3.8% tax from the health care law starting in 2013 coupled with the potential sunsetting of the income tax rates of the last decade would mean effectively a 58% higher tax rate on cap gains and as much as a 189% higher tax rate on dividend income if this doesn’t become law.
LL: Why introduce this bill now?
Rep. Roskam: The U.S. economy is really in an epic struggle right now for capital formation and job creation. We have a good opportunity here to create a growth agenda that creates predictability and certainty and avoids a tax increase that would hit businesses, seniors and investors of all sizes. With near double-digit national unemployment, Washington needs to be focused on helping to create the most competitive global job market here in the U.S. Key to creating a competitive environment like this is removing government barriers to job creation and providing certainty to the marketplace.
LL: Securing tax rates would help remove uncertainty for small businesses and might help job creation, but will that be enough to counter the price tag of the healthcare law?
Rep. Roskam: This tax increase, along with the new 3.8% tax from the Healthcare law starting in 2013 would mean tax rates would skyrocket, creating an even more devastating effect on the economy. While securing these tax rates won’t negate the burden of the healthcare law, it will lessen the overall effect of the tax increases significantly.
LL: Have you been able to quantify how many jobs could be created?
Rep. Roskam: While there are studies that show over 200,000 jobs would be lost the first year alone without these rates, we can be certain that by setting these rates permanent, we’ll produce a more business-friendly environment and make job creation more conducive. Go back to 2009 when President Obama was asked, do you raise taxes in a recession? And he wisely said, no, you don’t do that. So if we’re not in a recession now, we’re knocking on the door of one and we ought not cross that threshold and create a self-fulfilling prophecy by raising taxes. We need to create an environment where investors say I want to invest or seniors get the benefit of this - who are disproportionately in the market place – and where businesses say there is some predictability in this. The last thing we need to be doing is raising taxes.
LL: You have protests on Wall Street and you have CEOs once who were devout Obama supporters now turning their backs on him because they feel like they are being penalized for working hard and achieving the American Dream. Has the President effectively created an environment for class warfare?
Rep. Roskam: I think the President’s recent comments essentially attacking American business are frankly not helpful and don’t bring us one step closer to lower unemployment. The Administration has proposed raising taxes and imposing burdensome regulations on American businesses – the last thing they need to create jobs and put Americans back to work. This recession impacts Americans from all walks of life, which is why we need solutions that don’t burden one particular group over another. We need government to get out of the way, let the economy grow, and allow Americans to keep more of their income.
LL: What do you think of the President's jobs plan and what do you hope to see come out of the super committee?
Rep. Roskam: Like Majority Leader Cantor has said, there are portions of the President’s jobs plan that we support and will pass through the House, including making permanent the 3 percent withholding provision.
It’s also particularly welcome news that the White House just sent the long-stalled trade agreements to Congress this week. Pro-export policies help American companies sell our products abroad and in turn create jobs here. I look forward to voting for them shortly. But the White House’s all-or-nothing approach on their jobs plan is hardly serious. Our economy has already seen the failure of one “stimulus.”
With 14 trillion in debt and near double-digit unemployment, we don’t need another “stimulus” package – we need a new direction. Fundamental tax reform would be a good start.
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A Senior Talent Producer at CNBC, and author of "Thriving in the New Economy:Lessons from Today's Top Business Minds."