House Passes Bills to Prevent Looming Tax Increases

"We need to create some certainty for taxpayers, including our small businesses which continue to struggle under the weight of looming tax increases and over-regulation," said Rep. Thornberry.  "Extending all the current tax rates for one year and then setting up a procedure to fast track an overhaul of the tax system in the next year can help offer some of that certainty," he said.

On Wednesday, the House passed H.R. 8, the Job Protection and Recession Prevention Act.  The bill extends all tax rates for one year at their current levels. It maintains the 2010 estate tax compromise, which preserves the current $5 million exemption and 35 percent rate. It also continues marriage penalty relief, the $1,000 child tax credit, and provides a two-year AMT patch (for 2012 and 2013), among other provisions.

Small business organizations are warning that it is "imperative" that they "are not burdened with a tax increase." Around 75 percent of small businesses would be negatively affected by higher marginal income tax rates. Increasing the top two marginal rates would cost the economy around 710,000 jobs and would impact nearly a million small employers.

The House also passed a bill on Thursday that puts in place expedited procedures to completely overhaul the current tax system next year. The Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012 (H.R. 6169) would allow for an expedited process for Congress to make major changes to the system with deadlines in an effort to make it simpler and flatter. Changes include consolidating current tax rates into not more than two brackets and a top rate of not more than 25 percent. The bill would also reduce the corporate tax rate to 25 percent, completely repeal the Alternative Minimum Tax (AMT), and close loopholes and other special interest exemptions.

"A simpler, fairer tax system that lowers rates across the board and does away with lots of loopholes, exemptions and deductions is a common-sense way to help generate growth and create more taxpayers," said Thornberry. "It is past the time that the tax system be overhauled and I am encouraged that the House is willing to do it," he finished.

News reports suggest there is support for major tax reform on both sides of the aisle, including among the Republican and Democrat candidates for President. There is also broad support for reform among the American public. According to a recent Rasmussen poll, 77 percent of Americans think it's important to replace the entire federal tax code with something simpler.  It is likely that the topic will be debated through the fall and following the November elections.