Unless our tax-and-spend congress does something, all of those nice tax savings we have enjoyed ever since the Bush Administration put them into place, will all expire January 2011. Married couples, dead people, small business, and many many other areas all get walloped with the pre-Bush era tax rates. Allowing the Bush tax cuts to expire will be devastating to the U.S. economy.

Tax hikes expected to hit after the expiration of the Bush tax cuts will cause today’s corporate profits to tumble next year — probably right after a stock market collapse, says economist Arthur Laffer, chairman of Laffer Associates and inventor of the Laffer Curve.

According to a survey from the National Association for the Self-Employed, businesses will experience a 1,250 percent increase in the amount of tax-related paperwork required of small-business owners come 2012, making economic progress even more difficult.

Federal Reserve Chairman Ben S. Bernanke said extending at least some of the tax cuts set to expire this year would help strengthen a U.S. economy still in need of stimulus and urged offsetting the move with increased revenue or lower spending.

“In the short term I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy,” Bernanke said yesterday under questioning from the House Financial Services Committee’s senior Republican. “There are many ways to do that. This is one way.”

While Democrats want to keep the 2001 and 2003 tax reductions passed during former President George W. Bush’s administration for families earning as much as $250,000, Republicans aim to continue the cuts for high-income people as well. Bernanke didn’t endorse either party’s position or recommend a time period for an extension.

Laffer warns of these coming tax hikes:

• the highest federal personal income tax rate will go to 39.6 percent from 35 percent;

• the highest federal dividend tax rate pops up to 39.6 percent from 15 percent;

• the capital gains tax rate will hit 20 percent from 15 percent;

• the estate tax rate soars to 55 percent from zero.

“Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts,” he wrote in the Wall Street Journal. “Tax rate increases next year are everywhere.”

Laffer says the coming hikes — coupled with the prospect of rising prices, higher interest rates and more regulations next year — are causing businesses to shift production and income from 2011 to 2010 to the greatest extent possible.

“As a result, income this year has already been inflated above where it otherwise should be and next year, 2011, income will be lower than it otherwise should be,” Laffer says.

“It shouldn’t surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates,” he says.

Laffer notes that, according to a 2004 U.S. Treasury report, high income taxpayers accelerated the receipt of wages and year-end bonuses from 1993 to 1992 — more than $15 billion — in order to avoid the effects of the anticipated increase in the top rate from 31 percent to 39.6 percent.

At the end of 1993, taxpayers shifted wages and bonuses yet again to avoid the increase in Medicare taxes that went into effect beginning 1994.

Reagan’s delayed tax cuts, Laffer observes — which were passed under the Economic Recovery Tax Act in 1981 but didn’t take effect until 1983 — were the mirror image of President Barack Obama’s delayed tax rate increases.

“For 1981 and 1982 people deferred so much economic activity that real GDP was basically flat (i.e., no growth), and the unemployment rate rose to well over 10 percent,” he points out.

It shouldn’t surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rate

However, in 1983, the economy took off like a rocket, with average real growth reaching 7.5 percent in 1983 and 5.5 percent in 1984. Mr. Obama’s experience with deferred tax rate increases will be the reverse.

According to a survey from the National Association for the Self-Employed, businesses will experience a 1,250 percent increase in the amount of tax-related paperwork required of small-business owners come 2012, making economic progress even more difficult.

“To the mom and pop shop, time is money, and this new regulation is going to require plenty of both,” NASE Kristie Arslan told the Earth Times.

“The bottom line is that the Form 1099 expanded reporting requirement affects companies small and large, increasing the number of forms issued and received many times over.”

“The power to determine the quantity of money… is too important, too pervasive, to be exercised by a few people, however public-spirited, if there is any feasible alternative. There is no need for such arbitrary power… Any system which gives so much power and so much discretion to a few men, [so] that mistakes – excusable or not – can have such far reaching effects, is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic – this is the key political argument against an independent central bank.”  - Milton Friedman