Thread: In just six months, the largest tax hikes in the history of America will take effect.

OHH BOY!! what happened to no family making less then 250,000 will see increased taxes?

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In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:

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 two-thirds 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 an 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 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. The dependent care and adoption tax credits will be cut.

The return of the Death Tax. This year, there is no death tax. For those dying on or after January 1 2011, 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 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.

Second Wave: Obamacare

There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:

The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). 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.

The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. The major items include:

The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”

Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.

Read more: Six Months to Go Until
The Largest Tax Hikes in History

“I can make a firm pledge. Under my plan, no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

--Candidate Barack Obama, Sept. 12, 2008

“If your family earns less than $250,000 a year, you will not see your taxes increased a single dime. I repeat: not one single dime.”

--President Barack Obama, Feb. 24, 2009

“The statement didn’t come with caveats.”

--Obama spokesman Robert Gibbs, April 15, 2009, when asked if the pledge applies to healthcare

Yet the tax increase you are talking about was passed by a majority Republican House and Senate and signed into law by Bush.
It only had to be temporary, because by now the economy would be so strong, the surplus so large, that congress could easily make the cuts permanent.
Massive GOP policy FAIL.

Originally Posted by goober

Yet the tax increase you are talking about was passed by a majority Republican House and Senate and signed into law by Bush.
It only had to be temporary, because by now the economy would be so strong, the surplus so large, that congress could easily make the cuts permanent.
Massive GOP policy FAIL.

Seriously goober...why do you say these things?
I know you are more complex than to believe what you say above is the "whole truth".
You may believe that the tax cuts were wrong...and you can make reasonable arguments to support that - but to lower your mentality to overly simplistic "red vs. blue" noise is beneath you...and makes you a part of a serious problem in America.

I wish you would engage more fully than you do.

Sigh. I hate that taxes are going to go up. But I don't blame the Democrats. This one falls squarely on George Bush and the Republicans in Congress.

If they could have passed the tax cuts through regular procedure back in 2001, they would be permanent. they had to be sunsetted because they were passed through reconciliation. That was a terrible idea that created medium term uncertainty in the investment community and completely nullified any effect the tax cuts might have had.

Plus, the Republicans didn't even try to address spending from 2001 to 2006. They just blew up the deficit.

So fine, let the tax cuts expire, and learn from the mistakes made by George Bush, Tom Delay, and Trent Lott, the Three Stooges who destroyed the Republican Party and nearly took the entire conservative movement with it.

Originally Posted by goober

Yet the tax increase you are talking about was passed by a majority Republican House and Senate and signed into law by Bush.
....

HAW HAW HAW...

"We didn't do it the Republicans did." Isn't going to play well when folks have a bigger tax bill because the legitimate counter charge will be..."well, why didn't you do something about it then?"

Originally Posted by CSA

First Wave: Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:

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 two-thirds 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 an 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 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. The dependent care and adoption tax credits will be cut.

The return of the Death Tax. This year, there is no death tax. For those dying on or after January 1 2011, 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 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.

A couple of points here:
1) Under the extenders bill, the bottom marginal tax rate will remain at 10%. Currently, it is in the Senate and moving slowly, but it will probaby pass by the end of the year. See H.R. 4213 for more info.

2) The FY 2011 budget also has tax provisions which would allow the 20% capital gains tax only to affect the top earners while the 0% and 15% capital gains tax for the lower earners. This would make tax computation even more coomplicated if passed IMHO, but I guess that is a small price to pay for tax fairness.

3) Althoguh the death tax expires temporarily in 2010, it goes back to its original exemption of $1 million in 2001, which was an increase from $645000 from 1998. One of the main problems with the death tax, as well as the AMT, is that it is not indexed for inflation. Eliminating the estate tax or AMT misguided fiscal policy.

There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:

The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). 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.

The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

Third Wave: The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. The major items include:

The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”

Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.

Read more: Six Months to Go Until
The Largest Tax Hikes in History

A) Nothing in the provisions of the so called health care reform bill stipulats that the Health Savings Account, the FSA, and other tax favored health care benefits will be eliminated. It is possible if the deductible limits are set very low or with the excise tax. Thus it is still up in the air whether it will be eliminated,.

B) The loss of the business tax credits is coming from the FY 2011 budget, not the health care bill. This is something I disagree with and should be eliminated. Additionally, if, and I do mean if, these provisions are eliminated, they do not garner much tax revenues in return given that these credits are limited to the corporate and non corporate AMT limitations.

C) In the extenders bill previously mentioned, the educator expenses will be reinstated.

D) The 179 and the special depreciation deduction are great, but they come with caveats. Again, if property usesaccelerated depreciation methods, it is subject to AMT. As a result, the tax savings is not as great as one might think, depending on the income from the tax entity. In rare cases, it does not even matter. But eliminating the deduction may say some tax filing fees, naeely the filing of the AMT form whereas it would not normally be filed.

E) Eliminating the IRA tax free, and one time I believe, charitable contribution from the IRA is the only thing I agree with but not for reasons you might think. It has to do with the tax benefit rule and not to allow a double benefit.

Originally Posted by iamwhatiseem

Seriously goober...why do you say these things?
I know you are more complex than to believe what you say above is the "whole truth".
You may believe that the tax cuts were wrong...and you can make reasonable arguments to support that - but to lower your mentality to overly simplistic "red vs. blue" noise is beneath you...and makes you a part of a serious problem in America.

I wish you would engage more fully than you do.

Sorry, I was giving an overly simple answer to an overly simple premise.
Sometimes I get the tone wrong.

All those tax cuts will expire, true, the old rates won't stand however, unless the GOP filibusters the new proposals to make Obama look bad, which seems to be the overriding doctrine of the GOP lately.
So the OP was based on false premise.

I think tax rates are too low right now, especially those for the top income brackets, which have been too low in relation to the tax rates on the middle class since Reagan tipped the scales in favor of the accumulation of wealth by the top 1%.

I don't think balancing the budget is a priority right now, avoiding a depression is the priority now, balancing the budget can come later.

I'd like to see the estate tax strengthened, maybe a bigger threshold, a lower rate than 55%, but eliminate the loopholes that allow most large estates to dodge this tax.
Top rates for income tax should rise, until trend return to a lowering of the concentration of wealth.
I'd also like to see a petroleum tax, to encourage renewable energy, and conservation.

Those revenues won't be anywhere near expected, except for lower wage earners who don't have the income mobility upper wage earners do (i.e., realizing income at different times and in different places), and won't make a dent in the deficit.

The GOP doesn't make Obama look bad. Obama's lousy ideas make Obama look bad.

I think tax rates are too low right now, especially those for the top income brackets, which have been too low in relation to the tax rates on the middle class since Reagan tipped the scales in favor of the accumulation of wealth by the top 1%.

Our tax rates are some of the highest in the Western world. Canada's top rate is only 28% now. Sweden's is lower than ours! Of course, they have VATs as well, plus social insurance taxes that tend to be flat and affect payroll earners.

Most other countries have come to realize that the middle class is the only place to really get the big revenues. The US still functions on the fiction that the rich can pay for everything.

We are going to witness the rise and fall of a President. BO is a one term President. Each day that passes the American people are becoming convinced that he is incompetent and nothing more than a salesman for socialism. He doesn't know how to govern or lead, two qualities that essential for a President. The American people made a huge mistake.

Originally Posted by Hudson

. This would make tax computation even more coomplicated if passed IMHO, but I guess that is a small price to pay for tax fairness.

ah yes the old tax fairness...I don't earn that bread, but I guess I should be thankful?

Originally Posted by adaher

[B]I think tax rates are too low right now, especially those for the top income brackets, .

really? I assume you are not in that bracket. And besides they're just the rich so screw'em right?

and again besides that what does that do to provide me with relief at my income level, the 33% bracket? zip zero nada.

and this whole rep. taxes beat up on the middle class is horsehockey anyway, look at the bracket % going up? thats what is was before....fgs.....

the slight of hand we are about to see ala the lame duck congress and obamas vaunted commission on the deficit is a set up, the cuts will expire and, it won't be enough, he said a few days ago, I am going to see where people stand when I give them some hard truths ala their politics....that will equal we are broke and we will cut defense again and just roll along to a VAT or other income tax or cap gains dividends increases that stifles bus. while the 24% rise in discretionary spending HE rammed through last year remains untouched.....

Originally Posted by goober

Top rates for income tax should rise, until trend return to a lowering of the concentration of wealth.

cannot help yourself...what does 'concentration of wealth' have a thing to do with this....tell me?

I'd also like to see a petroleum tax, to encourage renewable energy, and conservation.

you've had 4 solid years of congress and the run of the both houses and the exec. for 16 months...so what stopped you? yea, thought so...

Originally Posted by adaher

I think tax rates are too low right now, especially those for the top income brackets, which have been too low in relation to the tax rates on the middle class since Reagan tipped the scales in favor of the accumulation of wealth by the top 1%.

Our tax rates are some of the highest in the Western world. Canada's top rate is only 28% now. Sweden's is lower than ours! Of course, they have VATs as well, plus social insurance taxes that tend to be flat and affect payroll earners.

Most other countries have come to realize that the middle class is the only place to really get the big revenues. The US still functions on the fiction that the rich can pay for everything.

I reckon with a shrinking middle class, eventually the only ones who will have to pay taxes are the RICH. Personally, I think the rich should be taxed heavily. It seems whenever we get into dire economic straits, the ones responsible for the bad times generally are the rich. Their greed took a system down.

It also seems that whenever the top 10 per cent of income earners increase their personal wealth by a hundred fold, it seems to preclude an economic collapse! It gives Capitalism a bad name, but repeats itself through our history. We never seem to learn a lesson from it either. That is the power of money.

I keep hearing the US is the highest taxed in the Western World. Perhaps on paper, before special exemptions, and hiding income, but the actual tax rate is probably lower on the rich than what is on paper. Try doing business in Germany if you THINK our tax rates are the highest. Whenever Warren Buffet's secretary pays a higher tax rate than Warren, (and he admitted this) this should show you that tax rates and "real tax rates" don't always jive.

Now the ones who will be paying the on paper tax rates are average Americans. Until you take away loopholes for the rich, please take the tax argument to someone who gives a damn. I say tax the rich at 90 per cent the way FDR did. None of those folks will ever miss a meal. If you actually feel you need to protect the weathy, go ahead, but I can assure you, those guys look out for themselves. And always have. But they love you doing so too! As you eat your can of pork and beans for dinner.

The Right Wingnuts actually THINK that it is in the best interest of this Nation to allow the rich to amass even more wealth, because they think some will trickle down to them. They will even maintain this position as the middle class shrinks. At what point will they see the error of their ways? Somehow, they think that if we let the rich keep all of their income, even if it was earned by shipping jobs overseas, that this somehow will put Americans back to work. It won't. Capitalism works best for a nation when the wealth is spred out, and not concentrated in the hands of the few. When it does get concentrated in the hands of the few, everyone else suffers. That is what is going on today, and has been going on for quite some time.

Free Trade was nothing more than a tool for building more wealth for the wealthy. They have used it well, at the demise of average Americans. The opinion that we should tax these folks lower is ludicrous. The Right
wingnuts need to take a new look at this. This ain't the same America we had in the 50's and 60's. Tax breaks for the rich just makes them richer, and that's all it amounts to. But keep waiting on the trickle down money. As you eat a can of cold pork and beans.