The Administration’s FY 2012 budget proposal includes a few proposed tax cuts including an AMT patch, extension of business tax incentives that will expire on December 31, 2011, and a proposal to make permanent only some of the current individual marginal rates and investment tax rates. On the other hand, the budget includes extensive changes to the U.S. international tax regime which would raise approximately $129 billion over 10 years. Other proposed revenue raisers include but are not limited to:
- repeal of the LIFO inventory accounting method,
- tax increases on financial institutions and products,
- tax increases on the oil and natural gas industry,
- reinstating the Superfund tax,
- taxing carried interest as ordinary income,
- restricting the use of grantor retained annuity trusts, and
- substantial tax hikes on taxpayers earning over $250,000 per couple ($200,000 for individuals).
The Chamber opposes the FY 2012 budget proposal because it would create an enormous expansion of the federal government, paid for with tax hikes on businesses and upper income individuals. Federal spending as a percentage of GDP remains high through the 10-year budget horizon, leading to trillions of dollars in additional deficits and increasing the level of public debt to 77% of GDP by 2021.
The proposal would offset much of the additional spending with massive tax hikes on businesses and higher income individuals, many of whom own the most successful U.S. small businesses that are taxed as individuals. Thus, the proposal would hinder the ability of businesses to grow and create jobs.
In lieu of a budget that provides for huge spending increases paid for with punitive tax increases that discourage saving and investment and slow job growth, the Chamber recommends that the Administration and Congress produce a budget plan that will get the US economy out of its current malaise and back on track for future growth.