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Thursday, January 19, 2012

Largest Tax Increases In US History One Year Away!

Largest Tax Increases In US History One Year Away!


By Dell Hill

It’s an election year, therefore it would be an extremely poor time to raise taxes for those seeking election or re-election, as the case may be.  But, that’s exactly what President Barack Obama, Harry Reid and Nancy Pelosi have done - with the always-available assistance of at least a half-dozen Republicans who act more like Democrats every day.

Will President Obama even dare to bring up the topic of increased taxes in his State of the Union Address?  I doubt it strongly.

State of the Union: One Year to Go Until Largest Tax Hikes in History

                       
“When President Obama delivers his State of the Union address on Tuesday Jan. 24, taxpayers will find themselves less than one year away from the largest tax hikes in American history.  There are three great waves of tax increases threatening families and small employers in January 2013.  On top of rising income tax rates, four additional Obamacare tax hikes will kick into full gear.  President Obama needs to face this tax hike threat of his own creation head on Tuesday night:

    First Wave: Expiration of 2001 and 2003 Tax Relief
   
In 2001 and 2003, the GOP Congress enacted several tax cuts for small business owners, families, and investors (later re-upped by President Obama and Democrat Congress in 2010).  The following tax hikes will occur on January 1, 2013:
   
Personal income tax rates will rise.  The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which the majority of small business profits are taxed).  The lowest rate will rise from 10 to 15 percent.  All the rates in between will also rise.  Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.  The full list of marginal rate hikes is below:
   
    - The 10% bracket rises to a new and expanded 15%
    - The 25% bracket rises to 28%
    - The 28% bracket rises to 31%
    - The 33% bracket rises to 36%
    - The 35% bracket rises to 39.6%
   
Higher taxes on marriage and family.  The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of taxable income.  The child tax credit will be cut in half from $1000 to $500 per child.  The standard deduction will no longer be doubled for married couples relative to the single level.  
   
Middle Class Death Tax.  The death tax is currently 35% with an exemption of $5 million ($10 million for married couples).  For those dying on or after January 1 2013, there is a 55 percent top death tax rate on estates over $1 million.  A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.
   
Higher tax rates on savers and investors.  The capital gains tax will rise from 15 percent this year to 23.8 percent in 2013.  The dividends tax will rise from 15 percent this year to 43.4 percent in 2013.  This is because of scheduled rate hikes plus Obamacare’s investment surtax.
   
    Second Wave: Obamacare Tax Hikes
   
There are twenty new or higher taxes in Obamacare.  Some have already gone into effect (the tanning tax, the medicine cabinet tax, the HSA withdrawal tax, W-2 health insurance reporting, and the “economic substance doctrine”).  Several more will go into effect on January 1, 2013.  They include:
   
Medicare Payroll Tax Hike.  The Medicare payroll tax is currently 2.9 percent on all wages and self-employment profits.  Starting in 2013, wages and profits exceeding $200,000 ($250,000 in the case of married couples) will face a 3.8 percent rate.
   
“Special Needs Kids Tax.”  Imposes a cap on FSAs of $2500 (now unlimited).  Indexed to inflation after 2013. There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.  Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.  This Obamacare cap harms these families.
   
Medical Device Tax.  Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax.  Exempts items retailing for $100.
   
“Haircut” for Medical Itemized Deductions.  Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI).  The new provision imposes a threshold of 10 percent of AGI.  Waived for 65+ taxpayers in 2013-2016 only.

Read the entire story by clicking right here.

Dell’s Bottom Line:

Perhaps the President was miss-quoted.  Let’s listen and see.



Nope!  You heard him say it.  Of course his administration has now changed course and has declared the tax increases in Obamacare are actually.....you know.....TAX INCREASES.

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