WASHINGTON, DC – U.S. Senator Roger Wicker (R-Miss.) today cosponsored legislation introduced by Senate Minority Leader Mitch McConnell that would extend the 2001 and 2003 tax cuts, permanently fix the Alternative Minimum Tax (AMT), and provide estate tax relief.

“After spending billions of taxpayer dollars to take over banks, health care, student loans, and the domestic auto industry, Congressional Democrats now are demanding that Americans pick up the tab to pay for their sweeping plans,” added Wicker. “This legislation would provide all Americans with the critical tax relief needed to overcome the current recession and help spur economic growth.”

On January 1, 2011, the tax cuts will expire unless Congress acts. The President has announced his opposition to extending these tax cuts to those making more than $250,000.  However, small businesses often are included in this bracket because many business owners pay income taxes at the individual rate rather than the corporate rate.

According to the IRS, the President’s 2011 tax hike would apply to half of all small business income in our country, and would impact 25 percent of the American workforce.  The National Federation of Independent Business reported businesses that employ 20 to 250 people would be hit the hardest if the tax cuts are not extended.

“The looming 2011 tax hikes would deal a significant blow to American job creators and further threaten the health of our economy,” added Wicker. “The Administration assured Americans that its stimulus bill would create jobs and reduce the unemployment rate, but unfortunately that did not happen. Without this legislation, Americans will be hit with the largest tax hike in history at a time when we can least afford it.”

Wicker’s support of this legislation comes after the senator’s five-week statewide listening tour. During his tour, Wicker heard from Mississippians about their concerns regarding the economy and the challenges many businesses face trying to plan for the future. Wicker discussed the importance of extending tax cuts to all Americans as a way to help turn around the economy. Wicker said that this legislation would aid economic recovery by providing financial stability for families and certainty for businesses to plan and invest. 

The Tax Hike Prevention Act of 2011 would:

• Preserve the 10, 15, 25, 28, 33, and 35 percent income tax brackets, rather than allow the President to implement a maximum official tax-rate bracket of 39.6 percent.
• Eliminate the hidden tax-rate increases that President Obama has planned for 2011.  The Personal Exemption Phaseout (PEP) and the Pease limitation on itemized deductions had increased tax-rates beyond the “official” tax rates, but have been eliminated over the last few years.  PEP and Pease act as penalties for having children, giving to charity, and claiming a mortgage deduction. 
• Continue marriage penalty relief.  Wicker believes a man and a woman should not be penalized with higher taxes simply because they decide to become husband and wife.  Without this legislation, married couples filing jointly would be penalized with higher tax rates that would cost approximately 25 million couples an average of $595 each.
• Maintain the progressive child tax credit at $1000 per child, rather than allowing it to fall to only $500 per child. Reducing the child tax credit is from $1,000 to $500 per child would cost 31 million families an average of $1,033 in 2011.
• Increase the individual Alternative Minimum Tax (AMT) exemption amount.  This bill would “patch” the AMT so that only 3.9 million families will be subject to it in 2010 and beyond. The AMT is a tax that especially hits families with children, as well as taxpayers in high-tax states.  It is currently scheduled to impact over 26 million American families with an additional tax in 2010 and even more Americans in future years.
• Preserve the tax on capital gains and dividends at 15 percent. Many congressional Democrats are planning to allow the tax on dividends to almost triple starting in 2011 from the current 15 percent to a maximum rate of 39.6 percent.  Capital gains may also be subject to a maximum tax of 20 percent, instead of the current 15 percent.  These high taxes on dividends would discourage businesses from incorporating and incentivize corporations to incur highly-leveraged debt. 
• Provide estate tax relief. The death tax reform section of this bill is based on the bipartisan Lincoln-Kyl estate tax reform proposal.  It provides for a 35 percent estate tax rate, a unified estate/ gift exemption amount of $5 million per individual, indexed for inflation, and a stepped-up basis for inherited assets. 

Click here to read more about Senator Wicker’s position on the 2011 tax hikes.

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