As usual, Arthur Brooks nails it:
After paying a lifetime of taxes on wages and salaries, business and farm profits and capital gains, Americans who save their money rather than spend it get the reward of giving 40% to Uncle Sam. As a political matter, the GOP also gave a big break to Democratic Senators running in 2014 who would have had to defend the 55% rate.
As for small business, the overall tax increase this year is substantial. The new listed top rate of 39.6% doesn’t include the phaseout of deductions that will take the actual rate to 41% or so for many taxpayers. Add the ObamaCare surtaxes on investment income (3.8%) and Medicare (0.9%), as well as the current Medicare tax of 1.45% (employee share), and the real top marginal tax rate on a dollar of investment income from a bank savings or money-market account will be about 46%. Throw in state taxes, and the marginal rates in many places will be in the mid-50%-or-higher-range.
So much for fairness – when you’re working more for the government for yourself, is there any doubt that this is unfair? Still, there’s this:
The private economy is growing, so perhaps it can absorb these tax shocks and keep moving. The tailwinds from the housing recovery and oil and gas revolution are helping, and the stock market is rising on a tide of easy money. But the higher rates will make the U.S. less competitive and keep growth slower than it might have been. As we learned in the 1980s and 1990s, faster growth than the anemic Obama recovery is the only real way to reduce deficits.
Those conservatives who are expecting an immediate collapse as a result of this mistake will likely be disappointed, while those of us who just want to get on with our lives may be relieved in the short term.
But eventually, the math with catch up. The only question is whether or not it will catch up in time to do something about it.