President Obama and Congress need to focus on policies in 2012 that will unleash the economic growth necessary to get the economy back on track, create jobs and lower the unemployment rate.

As more government spending has failed to create that growth, the president and Congress should turn to removing the obstacles that Washington policies are placing in the way of economic expansion. They should start with taxes, since taxes are one of the foremost growth-inhibiting policies. The to-do list below will guide them on how to set the economy free.

Preventing tax hikes

If Congress and the president are to remove the tax obstacles impeding economic growth, they must not put any new hurdles in the economy’s way. First and foremost, that means not raising taxes. To prevent tax hikes, the president and Congress must do more than avoiding actively raising taxes with new legislation. They must also undo tax hikes that have already occurred and prevent other tax increases scheduled to occur.

Take care of last year’s business

At the end of 2011, a package of 51 tax-reducing provisions known as the “tax extenders” expired. At the same time, the patch that raises the income threshold over which taxpayers qualify for the alternative minimum tax also expired. Unless Congress and the president act to extend these provisions retroactively, the tax hikes that occurred when they expired will remain in place. That will include a tax hike on millions of middle-income families who will pay the Alternative Minimum Tax that only “the rich” were supposed to pay.

To-Do No. 1: Patch the AMT; let bad policies expire. Congress and Obama should go through the individual provisions in the extenders and keep those that reflect sound policy and allow those that do not to permanently expire; chief among the latter are the ethanol credits. They should then lower other taxes by the amount these rejected provisions will raise.[1] They should also raise the AMT threshold permanently and index it for inflation so that middle-income families never face the threat of the AMT again.

To-Do No. 2: Extend the payroll tax holiday or replace it with a more pro-growth policy. Obama and Congress also left undecided what they are going to do with the temporary payroll tax holiday. At the end of 2011, they extended it only through Feb. 29. Obama and other supporters of the payroll tax holiday argue it encourages growth and should therefore be extended while the economy remains weak. However, the proof that it is not a pro-growth policy is the substandard growth the economy experienced in 2011. Even though the holiday will not inspire growth this year, either, Congress and the president should continue it for the remainder of 2012 to avoid a tax hike. A better option would be to replace it with tax relief that actually strengthens the economy as well as family budgets.

To-Do No. 3: Make permanent the tax cuts that expire at the end of the year. The full array of the Bush tax cuts -- everything from lower marginal tax rates for taxpayers at all income levels to the expanded child tax credit -- expires at the end of the year. To avoid this major tax hike, which would sap the economy of the small amount of momentum it is building, Congress and President Obama need to extend all the Bush tax policies permanently. They should turn their attention toward doing so as soon as they take care of last year’s overdue tax work, rather than waiting until the end of the year as they have done in recent years with important expiring tax policies. Acting to avoid this enormous tax hike early in the year would increase certainty for businesses and reduce the chance that political tensions would derail an extension during what could be a contentious lame-duck session of Congress after the November election.