Beware the Taxmageddon

[Clementine]

There is what Obama says and then there is what Obama does while we aren't watching.

Beware the Taxmageddon
U.S. Taxes Set to Go Up by $494 billion in 2013

Here’s why you should be worried. For starters, remember that this is the same President who in 2009 promised, “if your family earns less than $250,000 a year, you will not see your taxes increased a single dime.” That’s a vow he’s broken, and in 2013, things are going to get even worse if this year Obama doesn’t lead and Congress doesn’t act. Katy, bar the door, there’s big trouble in store.

The tax man won’t draw his billions from the American taxpayer with just one big needle — the massive tax increase will be the product of tax policies expiring in seven different categories, on top of five new Obamacare tax hikes taking effect. In a new paper, Taxmageddon: Massive Tax Increase Coming in 2013, Heritage’s Curtis Dubay details the tax hikes that will occur if President Obama and Congress do not act before the end of the year:

Almost 34 percent of the tax increase from Taxmageddon comes from the expiration of the 2001 and 2003 Bush tax cuts. These cuts are best known for reducing marginal income tax rates, but they also reduced the marriage penalty, increased the Child Tax Credit and the adoption credit, and increased tax breaks for education costs and dependent care costs.

Another 25 percent of Taxmageddon comes from the expiration of the once-temporary payroll tax cut. The expiration of the patch on the Alternative Minimum Tax (AMT) — which would raise the income threshold over which families qualify for the AMT to prevent middle-income families from paying this tax that is only supposed to impact “the rich” — accounts for 24 percent of the total potential 2013 tax increase.

The balance of the tax hikes comes in part from new taxes under Obamacare, the expiration of tax cuts in the 2009 stimulus, the expiration of a group of policies known as “tax extenders,” changes in the current policy on the death tax (in 2013, it will rise from 35 percent today to 55 percent and the exemption will fall from $5 million to $3.5 million), and the expiration of businesses’ ability to fully expense new capital investments.

This $494 billion in higher taxes will certainly hit families and business hard in 2013, but their effects are already being felt. Dubay explains that Americans must plan for tomorrow, and the tremendous uncertainty about tax policy makes the future much more uncertain, thus discouraging the investments and other actions needed to spur the economy to create jobs faster today.

So while the President and Congress appear content to put off ’til the 11th hour what they can and should do today, those who will have to pay the higher tax burden are waiting to see what the future holds. Dubay says that this is “slowing job creation and stopping many of the millions of unemployed Americans from going back to work.”