This would be devastating to the fragile economic recovery, and to every American still looking for work. Combined with the expiration of temporary payroll tax relief, the United States faces what has now been labeled “taxmageddon”—a fiscal headwind so strong that it threatens a swift return to recession.

 

Former Treas. Sec. Snow at The Wall Street Journal

EXCERPTS:

With the expiration of the 2003 tax law at the end of this year, taxes—not only on capital earnings but also on ordinary incomes—will return to the much higher levels that previously existed.

 

This would be devastating to the fragile economic recovery, and to every American still looking for work. Combined with the expiration of temporary payroll tax relief, the United States faces what has now been labeled “taxmageddon”—a fiscal headwind so strong that it threatens a swift return to recession.

What seems to be lacking is a clear path to the future. Here are some suggestions for policy makers.

First, remember the principle that you always get less of anything you tax. For this reason, society discourages undesirable activities by imposing so-called “sin” taxes. By the same token, high marginal tax rates discourage work, risk-taking and capital formation.

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