Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature currently requires accessing the site using the built-in Safari browser.
Six Months to Go Until<br> The Largest Tax Hikes in HistorySix Months to Go Until
The Largest Tax Hikes in History
From Ryan Ellis on Wednesday, July 7, 2010 5:27 PM
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:
(N.B. This version of the document contains even more tax hikes than the original version did)
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 Tanning Tax. This went into effect on July 1st of this year. It imposes a new, 10% excise tax on getting a tan at a tanning salon. There is no exemption for tanners making less than $250,000 per year.
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 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.
Brand Name Drug Tax. Starting next year, there will be a multi-billion dollar tax assessment imposed on name-brand drug manufacturers. This tax, like all excise taxes, will raise the price of medicine, hurting everyone.
Economic Substance Doctrine. The IRS is now empowered to disallow perfectly-legal tax deductions and maneuvers merely because it judges that the deduction or action lacks “economic substance.” This is obviously an arbitrary empowerment of IRS agents.
Employer Reporting of Health Insurance Costs on a W-2. This will start for W-2s in the 2011 tax year. While not a tax increase in itself, it makes it very easy for Congress to tax employer-provided healthcare benefits later.
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. These 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. ....
I freely admit I'm not an economist, CG. However, I do know something about taxes. It is crappy tax policy to use the Income Tax Code to advance any policy; it is best suited to raising revenues, period. And we have experience with trickle down, remember? Know any economists who regard it as a past success? I don't.
I wonder if these people still feel the same way?Are you or do you know anybody who is going to have to pay more taxes when Bush's class warfare tax cut for the wealthy expires as per the law he signed?
In other words are you bringing down over a quarter million dollars a year.
I'm sure the RepubliCONs are very worried about the Wall Streeters and the Movie Stars and the Pro atheletes (poor Manny Ramirez), and the like.
Oh dear!. What about Warren Buffet? Why this is terrible!
I got to go now, I have to figure out if I can get new tires on the front of my work truck AND buy my son new shoes for school.
Poor Warren Buffet!
Are you or do you know anybody who is going to have to pay more taxes when Bush's class warfare tax cut for the wealthy expires as per the law he signed?
In other words are you bringing down over a quarter million dollars a year.
I'm sure the RepubliCONs are very worried about the Wall Streeters and the Movie Stars and the Pro atheletes (poor Manny Ramirez), and the like.
Oh dear!. What about Warren Buffet? Why this is terrible!
I got to go now, I have to figure out if I can get new tires on the front of my work truck AND buy my son new shoes for school.
Poor Warren Buffet!
I freely admit I'm not an economist, CG. However, I do know something about taxes. It is crappy tax policy to use the Income Tax Code to advance any policy; it is best suited to raising revenues, period. And we have experience with trickle down, remember? Know any economists who regard it as a past success? I don't.
It's bigger than the Income Tax Code, Mad. When you're looking at this stuff, you really can't just look at bits of it, you need to look at the whole picture.... how one part impacts another... and the effect of other parts of economic issues on other economic issues. That's why I tend to go with the view of actual experts. Far too many people, who don't actually know all that much about economics, think only of one part. No offense, but, I know lots of Economists - I write about economics for a living.... I'm certainly not an expert... But I work with people who are.... global experts... and economics is a global issue. We tend to forget that.
I freely admit I'm not an economist, CG. However, I do know something about taxes. It is crappy tax policy to use the Income Tax Code to advance any policy; it is best suited to raising revenues, period. And we have experience with trickle down, remember? Know any economists who regard it as a past success? I don't.
It's bigger than the Income Tax Code, Mad. When you're looking at this stuff, you really can't just look at bits of it, you need to look at the whole picture.... how one part impacts another... and the effect of other parts of economic issues on other economic issues. That's why I tend to go with the view of actual experts. Far too many people, who don't actually know all that much about economics, think only of one part. No offense, but, I know lots of Economists - I write about economics for a living.... I'm certainly not an expert... But I work with people who are.... global experts... and economics is a global issue. We tend to forget that.
Okie dokie. So where's the expert economic analysis that trickle down will work this time, even though it failed before? And is it so persuasive to you we should ask the working poor and middle class to accept a $700 Billion price tag for this gamble?
Here's a summary:Six Months to Go Until<br> The Largest Tax Hikes in HistorySix Months to Go Until
The Largest Tax Hikes in History
From Ryan Ellis on Wednesday, July 7, 2010 5:27 PM
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:
(N.B. This version of the document contains even more tax hikes than the original version did)
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%
True. But we have an enormous deficit and have likely reached almost full capacity on debt. The only real alternative to raising taxes is reducing spending -- and it would have be severe to have the same impact. Therefore, higher taxes seem to me the lesser of two evils.
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 correct term for a marriage offset is a "single person penalty". In other words, no matter how a tax schedule is set up, someone can justifiably claim that the other guy gets a better deal. The marriage offset made sense when adopted (back in the 1920's, I believe) as few women worked outside the home. It makes almost no sense now.
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.
The estate and gift taxes, etc., are inefficient and always have been. Almost anyone can have an estate plan done that allows their family to escape tax. In the extraordinary cases where no planning technique will work fully, the tax has a social value in helping to prevent concentration of wealth between generations.
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.
AKA continued tax breaks for wealthy people with unearned income. BTW, I'm a skeptic. I'm not fully persuaded that a low capital gains rate encourages savings.
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 Tanning Tax. This went into effect on July 1st of this year. It imposes a new, 10% excise tax on getting a tan at a tanning salon. There is no exemption for tanners making less than $250,000 per year.
It's a sin tax. Not my favorite way to shape behavior, but certainly a time honored one.
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).
HSAs and the like are a complex area of tax law. They have never been free of controversy. I suspect (though I don't know) that tis change is designed to prevent abuses. After all, if aspirin can make me feel better, why not Jimmy Choo shoes?
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.
See above.
Brand Name Drug Tax. Starting next year, there will be a multi-billion dollar tax assessment imposed on name-brand drug manufacturers. This tax, like all excise taxes, will raise the price of medicine, hurting everyone.
No sector of the economy in the US have been bigger pigs at the trough than drug companies. As to whether prices will rise, that remains to be seen. Mebbe their obscene profit levels will dip instead.
Economic Substance Doctrine. The IRS is now empowered to disallow perfectly-legal tax deductions and maneuvers merely because it judges that the deduction or action lacks “economic substance.” This is obviously an arbitrary empowerment of IRS agents.
This is not new. It's been law since almost the inception of the Internal Revenue Code that a transaction which lacks substance can be overlooked. There is a long line of cases and other authorities on the topic, and I doubt the new law does much more than codify them. BTW, this is not an example of a new or higher tax.
Or do you prefer we allow fraudulent transactions to have effect for tax purposes?
Employer Reporting of Health Insurance Costs on a W-2. This will start for W-2s in the 2011 tax year. While not a tax increase in itself, it makes it very easy for Congress to tax employer-provided healthcare benefits later.
It was never hard. There already exists an extensive and byzantinne body of law about the employee benefits which may be exempted from tax, etc. There is a modest data collecting and reporting cost associated with any change to W-2's, but that's it. The analyst is being dishonest here.
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. These 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.
The AMT is imposed on a taxpayer who has substantial tax exempt income but no taxable income such as wages for ordinary income tax purposes. The typical scenario is someone whose income is high and derived almost entirely from tax free municipal bonds, etc.
How many families do you know that fit such a profile?
"Indexing" refers to running up a minimum, etc. along a consumer price index, cost of living index, etc. Since we have almost no inflation now, this is hardly likely to result in massive new tax bills for anyone.
Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”
This may or may not be accurate; I'll admit I have not studied up on it. If true, I'll agree this is a new tax. Expensing and accelerated depreciation allow a business to deduct acquisition costs against this year's income rather than against the income of the next 10 or more years.
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.
This is too broad a statement to reply to in much detail. However, notice the author does not say "research and development costs" will no longer be deductible. The term he uses (a credit, which is different from a deduction, for "research and experimentation") sounds like a special benefit to some market segment -- not a tax policy I favor.
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.
Dunno, would have to go look.
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. ....
Are you or do you know anybody who is going to have to pay more taxes when Bush's class warfare tax cut for the wealthy expires as per the law he signed?
In other words are you bringing down over a quarter million dollars a year.
I'm sure the RepubliCONs are very worried about the Wall Streeters and the Movie Stars and the Pro atheletes (poor Manny Ramirez), and the like.
Oh dear!. What about Warren Buffet? Why this is terrible!
I got to go now, I have to figure out if I can get new tires on the front of my work truck AND buy my son new shoes for school.
Poor Warren Buffet!
It's bigger than the Income Tax Code, Mad. When you're looking at this stuff, you really can't just look at bits of it, you need to look at the whole picture.... how one part impacts another... and the effect of other parts of economic issues on other economic issues. That's why I tend to go with the view of actual experts. Far too many people, who don't actually know all that much about economics, think only of one part. No offense, but, I know lots of Economists - I write about economics for a living.... I'm certainly not an expert... But I work with people who are.... global experts... and economics is a global issue. We tend to forget that.
Okie dokie. So where's the expert economic analysis that trickle down will work this time, even though it failed before? And is it so persuasive to you we should ask the working poor and middle class to accept a $700 Billion price tag for this gamble?
Do your own research and draw your own conclusions. I am not here to spoonfeed people.
And..... again.... There is no 'Class' in America. You might be prepared to allow your politicians to use this 'class' shit to divide you from other hard working Americans, but I am not.
Okie dokie. So where's the expert economic analysis that trickle down will work this time, even though it failed before? And is it so persuasive to you we should ask the working poor and middle class to accept a $700 Billion price tag for this gamble?
Do your own research and draw your own conclusions. I am not here to spoonfeed people.
And..... again.... There is no 'Class' in America. You might be prepared to allow your politicians to use this 'class' shit to divide you from other hard working Americans, but I am not.
It is goofy to claim "there is no class in America", CG. WTF do you believe? That this country is one big happy commune? Of course we have rich and poor and middle class.
And I have done my own research...that is how I formed my POV. Since you have a different one, I wondered who you've been reading. If you don't care to share, that's okay.
You and I share a nation, CG. We must share the burden of funding government. And while I appreciate that you dislike jealousy, I fail to see how that justifies transferring a portion of the tax burden of the rich onto the middle class and working poor.
Sometimes, what you and others who share your POV on taxation say makes me think you guys secretly believe that we should tax the middle and lower class more heavily as some sort of "lost opportunity cost". As if only good old fashioned get up and go keeps anyone from earning $1 Million plus a year.
By the way divecon, answer the question.
You and I share a nation, CG. We must share the burden of funding government. And while I appreciate that you dislike jealousy, I fail to see how that justifies transferring a portion of the tax burden of the rich onto the middle class and working poor.
Sometimes, what you and others who share your POV on taxation say makes me think you guys secretly believe that we should tax the middle and lower class more heavily as some sort of "lost opportunity cost". As if only good old fashioned get up and go keeps anyone from earning $1 Million plus a year.
You and I share a nation, CG. We must share the burden of funding government. And while I appreciate that you dislike jealousy, I fail to see how that justifies transferring a portion of the tax burden of the rich onto the middle class and working poor.
Sometimes, what you and others who share your POV on taxation say makes me think you guys secretly believe that we should tax the middle and lower class more heavily as some sort of "lost opportunity cost". As if only good old fashioned get up and go keeps anyone from earning $1 Million plus a year.
There is no fucking 'class' in our society. And, stop thinking that you know how I think better than I do. It ain't your business how much I earn or what I do with my money.
By the way divecon, answer the question.
Does you employer pay for your health care? If he does all that he pays will be considered now as part of your paycheck, you will pay income tax on that money.
