New House Budget Means Higher Taxes
The Heritage Foundation has done an analysis of the new House Budget crafted by the Democratic majority in Washington and concluded that it means higher taxes across the board. Their reasoning:
The House leadership has proposed to increase spending over the next five years. Given the leadership’s avowed commitment to paying for spending increases, tax revenues will have to rise. Which taxes will have to rise is unclear, as budget resolutions are notoriously short on details. However, the failure of House leaders to include any language addressing the expiring Bush tax cuts of 2001 through 2004 indicates that they could intend to end these tax cuts. This, in turn, means that the House leadership could be allowing American taxpayers to assume a large and expensive tax increase upon the expiration of these tax cuts.
The House budget resolution has the potential to cost the average American taxpayer an additional $3,026 in taxes. In addition to the increased tax burden, Americans could also see their personal income decrease by an average of $502 dollars due to a weaker economy. Moreover, the budget resolution could damage employment growth, causing about one million fewer jobs to be created, and has the potential to damage economic output by over $100 billion nationally. The average cost of the House budget resolution to each congressional district amounts to the potential loss of 2,284 jobs that would have otherwise been created and a loss in economic output by an average $240 million.
The culprit for these negative impacts is higher taxes. Many economists believe that higher taxes, particularly on capital, cause the level of private investment to fall, thereby slowing productivity improvements and weakening the earning capacity of households. Wages and business earnings, which are closely tied to productivity, would fall as well.
Again, the budget resolution does not contain a detailed tax plan. However, the resolution also is silent on the most important tax policy change since 2001: the expiration of the tax law changes from 2001 through 2004 over the next four years. This paper presents estimates of the potential impact that allowing the Bush tax cuts to expire would have on Americans.
Here’s how–according to their calculations–Rhode Islanders would be affected: