35% to 39.6% - the rise in the top income tax rate beginning Jan. 1, 2011.
15% to 39.6% - the rise in the highest federal dividend tax rate beginning Jan. 1.
15% to 20% - the rise in the capital gains tax rate beginning Jan. 1.
0% to 55% - the rise in the estate (or death) tax rate beginning Jan. 1.
Arthur Laffer, writing for the Wall St. Journal argues that some of the encouraging signs we are seeing in the economy are illusory as people and businesses are simply making rational decisions to shift income and production into this year and away from next year when the aforementioned tax rates shoot up.
Laffer makes the case that the Reagan tax cuts are the mirror opposite of the Obama economic plan. In '81, Reagan got his first series of tax cuts passed but because they didn't take effect until Jan. 1, 1983, the economy fell into recession as people deferred economic activity until the clock struck midnight on 1982. In 1983, the economy exploded in growth after 5 quarters of negative or minimal GDP growth.
Also, the prospect of rising prices, higher interest rates and more regulations next year will further entice demand and supply to be shifted from 2011 into 2010. In my view, this shift of income and demand is a major reason that the economy in 2010 has appeared as strong as it has. When we pass the tax boundary of Jan. 1, 2011, my best guess is that the train goes off the tracks and we get our worst nightmare of a severe "double dip" recession.
We've been biting our tongue now for a while because we do not want to seem pessimistic and/or betting against Ameica but with the expiration of the Bush tax cuts combined with the excessive regulatory regime that has been enacted already and that which is pending, we just don't see any way around double-dipping.
It's a damn shame and it just doesn't need to be this way.