The following originally appeared as an op-ed in Politico. -Team Hatch
Another tax day has come and gone. But the threat of a tax system even worse than the awful one we have is still hanging over our heads.
Unless Congress acts by the end of this year, tax increases of unprecedented size for all Americans are due to kick in Jan. 1, sending jolts throughout our still teetering economy.
These job-killing tax increases include ending the 10 percent tax bracket, which benefits everyone who pays taxes; cutting the $1,000-per-child tax credit to $500 and increasing top rates by double digits, which would apply to small businesses, the ones most likely to begin hiring.
The net effect would be a staggering blow to America's job creation machine, just as it is showing signs of life.
These increases come on top of the $500 billion in new taxes due over the next 10 years from the health care bill. And, like the health care taxes, the 2011 tax hikes won't be confined to families making more than $250,000 a year, as President Barack Obama promised.
If this were not enough to frighten any tax-weary citizen or business owner, there is more bad news.
Liberals in Congress and in the administration are floating the idea of a European-style value-added tax, or VAT, to finance the European level of spending they are proposing. This is on top of higher capital gains rates -- poised to rise by a third, with the top tax rate on dividends set to nearly triple.
What this all adds up to is a gigantic question mark about what tax rates U.S. businesses, investors and families are going to face in just eight months. This uncertainty is terrible for economic growth and job creation.
Jobs are made when investors and entrepreneurs risk their money to start or expand a business. Any uncertainty makes them hesitant to invest, which can slow down or threaten an economic recovery.
If we hope to avoid the economic catastrophe now hanging over our heads -- which some economists predict could be worse than the downturn we suffered two years ago -- Congress and the president must do three things.
First, they must act now to prevent the tax increases from going into effect next January. There is already a bipartisan consensus to stop those set to affect lower- and middle-income taxpayers.
Sadly, the president and most Democrats appear willing to stand by and let tax increases ravage the so-called wealthy.
This is misguided, because those with higher incomes are also those with money to invest. Tax them at dramatically higher levels, and you will get dramatically lower investment. Moreover, the small businesses most likely to create jobs would be devastated by these tax increases.
Second, the president and congressional leaders need to send a clear signal that they are not going to pass growth-sucking tax increases -- like a VAT -- in the near future.
Investors, business owners and all Americans have a right to be able to compute their tax bill next year, and the year after, with some level of certainty. Anything less would hamper growth and new jobs.
Third, Republicans and Democrats must unite to simplify our tax code.
There are many ways we can improve our tax system to make it easier, more competitive on a global basis and friendlier to economic growth. We do not have to wait for overall tax reform to make this fundamental part of our economy work better for everyone.
We must not strangle this nascent recovery with job-destroying tax increases.