6 months till the largest tax hikes in US history

[CosmicCowboy]

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: http://www.atr.org/sixmonths.html?content=5171#ixzz0sYkvaI00

[boutons_deux]

They aren't tax hikes, they are tax restorations.

How about sales tax applied to all Wall St trades?

How about dropping all subsidies to big oil/coal/gas?

How about taxing fund managers' fees as regular income instead of investment income?

nah, it's easier to make suckers like wage earners get screwed alone, with the evil corps escaping paying their way.

[Kori Ellis]

I don't know how much of that article is BS, but this line is:


The dependent care and adoption tax credits will be cut.

The adoption tax credit was just extended and raised when the health care bill was passed.

[CosmicCowboy]

They aren't tax hikes, they are tax restorations.

Even you aren't that stupid. Letting a tax cut expire=raising taxes.

Bottom line taxes go up from one year to the next.

[Winehole23]

Dollar doesn't know the difference between the government and the US taxpayer. What's the big deal, CC?

[Winehole23]

The Bush tax cuts were deficit financed. If there's some way to pay for them responsibly, I'm all ears, CC. How we gonna pay for the the Bush tax cuts?

[ducks]

ofcourse people want hand outs from the goverment taxes have to go up
especially to pay for the new irs people

flat tax would = less irs people and less taxes

[Winehole23]

^^^Non sequitur?

[Nbadan]

Ducks likes to blame the poor, especially kids...

...people are living longer and require ever more expensive care..those two factors are the greatest cause of why social services spending keep increasing...not welfare mothers

[MannyIsGod]

LOL chain emails.

[Nbadan]

Blame the email but CC should have confirmed what he was posting was verifiable..this makes him no better than Ducks in the run- for-cover category

[DMX7]

Even you aren't that stupid. Letting a tax cut expire=raising taxes.


I thought you were kidding at first, then I realized you were serious.

[DMX7]

The Bush Tax Cuts were a de facto bribe to get your vote. The U.S. couldn't afford them then, it can't afford them now. Even John McCain agreed with that.

As usual, the black man will have to do the dirty work and at a time when the economy is still in the after shock of the 2008 economic crisis.

[EmptyMan]

lol bush tax cuts lol cap and trade lol VAT

lol good times ahead

[ChuckD]

Question CC: doesn't this country eventually have to start paying it's "credit card bills"? And before you start on your free spending Democrats rant, no GOP administration in the past 30 years has paid for anything they spent.

[Cant_Be_Faded]

It's funny because conservative economists talk as if the era of Bush taxing was heinous enough as it was....when the american public has been taxed insanely heavier and the economy has still flourished.

The problem will never be taxation the problem is spending.

I wish there was a rule on federal workers like what The Governator declared on state government workers. Get your fucking budget under control America.

[CosmicCowboy]

The bottom line is that the Federal Government doesn't need 40% of my income. I'm not rich. I'm just trying to keep a small business going that hires 10 people. I pay 100% of health insurance for employee and family. They have all raised families on the checks I write every week. I respect them. They respect me.

Running a business is tough enough. I don't need my government trying to make it impossible to keep doing what I'm doing.

I could care less what the anonymous posters in this forum think about me.

[CosmicCowboy]

LOL chain emails.

LOL ignorant assholes that will never be able to pay off the student loans they are living off of because they are too fucking stupid to ever be self sufficient.

BTW Manny, has Jekka figured out yet what a fucking loser you are?

[Trainwreck2100]

:lol
wait


:lmao




wait



:rollin


bitching about something expiring, if its not supposed to expire it should't have an expiration date

[TDMVPDPOY]

those income tax rates are still pretty low my friend...

down here teh highest is 47%

[balli]

Fuck you CC and your 4.6% of bush tax cuts. You're a selfish fucking unpatriotic joke and a disingenuous liar.

[CosmicCowboy]

It still means that taxes go up on EVERYONE. You really think another 3% of your gross income is no big deal?

[CosmicCowboy]

Fuck you CC and your 4.6% of bush tax cuts. You're a selfish fucking unpatriotic joke and a disingenuous liar.

And you are still a fucking loser. Have a nice loser life.

[balli]

It still means that taxes go up on EVERYONE. You really think another 3% of your gross income is no big deal?
I don't give a fuck. See, unlike greedy & illogical you, I think we should pay for the things we spend on. I don't expect Bush's wars, the military, Interstate system, border security/homeland security and the TVA to pay for themselves. I don't believe in giving millionaires tens or hundreds of thousands of dollars so they can stuff it back into their savings accounts. I don't believe letting the ridiculous tax code that allowed it to happen in the first place, to expire, is the equivalent of a tax hike.

But again, I'm not the sack of dog shit that you are. CC.

[CosmicCowboy]

I don't give a fuck. See, unlike greedy & illogical you, I think we should pay for the things we spend on. I don't expect the military, Interstate system, border security/homeland security and the TVA to pay for themselves.

If that was all we were paying for they would need no more than 25%. If you keep thinking "they" are smarter than you and will "look out" for you and are willing to keep allowing "them" to "take care" of you the you fucking deserve what you (won't) get.

Government is too fucking big. It is a big tick on our collective ass.

[Trainwreck2100]

seriously though whatever percentage more they take from us they should take from entitlement programs

[balli]

seriously though whatever percentage more they take from us they should take from entitlement programs

I just assume we start with the social engineering. Probably starting with the people who use/abuse/benefit from entitlements. We need to re-educate the rabble and keep them from pro-creating. We won't have to cut the legs out from underneath the welfare class so much as train it to stand on it's own.

Of course, this is radical theory, but it shouldn't be.

[scott]

The bottom line is that the Federal Government doesn't need 40% of my income. I'm not rich. I'm just trying to keep a small business going that hires 10 people. I pay 100% of health insurance for employee and family. They have all raised families on the checks I write every week. I respect them. They respect me.

Running a business is tough enough. I don't need my government trying to make it impossible to keep doing what I'm doing.

I could care less what the anonymous posters in this forum think about me.

You need to get better at doing taxes.

[Nbadan]

seriously though whatever percentage more they take from us they should take from entitlement programs

...700 billion dollars per year in defense and we can't stop people from sneaking in from Mexico...we spend 10 times more than any other country and almost as much as all the other countries combined on military, and we are at least a decade ahead technologically....and that's the stuff we know about...if we're gonna make cuts, cut the military spending...

[CosmicCowboy]

...700 billion dollars per year in defense and we can't stop people from sneaking in from Mexico...we spend 10 times more than any other country and almost as much as all the other countries combined on military, and we are at least a decade ahead technologically....and that's the stuff we know about...if we're gonna make cuts, cut the military spending...

I actually agree to a certain extent. Lets get the fuck out of the Middle East. It's a shithole that we can't win. I'm not saying we don't need a flexible and strong military and I still want to be able to project force worldwide (read carrier groups) but 700 billion is a lot of moolah. We can be secure for less.

[Trainwreck2100]

I just assume we start with the social engineering. Probably starting with the people who use/abuse/benefit from entitlements. We need to re-educate the rabble and keep them from pro-creating. We won't have to cut the legs out from underneath the welfare class so much as train it to stand on it's own.

Of course, this is radical theory, but it shouldn't be.
the problem is the more kids they crap out the more money they get

[CosmicCowboy]

I just assume we start with the social engineering. Probably starting with the people who use/abuse/benefit from entitlements. We need to re-educate the rabble and keep them from pro-creating. We won't have to cut the legs out from underneath the welfare class so much as train it to stand on it's own.

Of course, this is radical theory, but it shouldn't be.

Even stupid uneducated people are rational.

if you set up a system that rewards dumb bitches to have babies they will have babies.

[Trainwreck2100]

Even stupid uneducated people are rational.

if you set up a system that rewards dumb bitches to have babies they will have babies.

free food, cheap housing, free money to pay for previous housing, buy kids shit that ain't good for em and makes em fat, while i go out and party at night with my baby daddy who lives with me even though i say im single. So i can get all of the aforementioned shit.



yes i see the inherent irony that none of these dumb bitches would use the word aforementioned.

[SnakeBoy]

These arguments on taxes should be lower or higher are worthless without posting your gross income and how much you paid in income tax.

[Trainwreck2100]

i got $2 back this year

[ChuckD]

I actually agree to a certain extent. Lets get the fuck out of the Middle East. It's a shithole that we can't win. I'm not saying we don't need a flexible and strong military and I still want to be able to project force worldwide (read carrier groups) but 700 billion is a lot of moolah. We can be secure for less.

You're still only looking at spending. That's like someone buried in credit card debt slowing their spending. Laudable, but it doesn't touch the balance.

[Borat Sagyidev]

The bottom line is that the Federal Government doesn't need 40% of my income. I'm not rich. I'm just trying to keep a small business going that hires 10 people. I pay 100% of health insurance for employee and family. They have all raised families on the checks I write every week. I respect them. They respect me.

Running a business is tough enough. I don't need my government trying to make it impossible to keep doing what I'm doing.

I could care less what the anonymous posters in this forum think about me.

Do you have any slaves?

[Nbadan]

You're still only looking at spending. That's like someone buried in credit card debt slowing their spending. Laudable, but it doesn't touch the balance.

The theory is that reduced spending will eventually be surpassed by increased revenue since in a steadily growing population such as the US, the labor market increases by about 100k workers every month...more workers, more revenue...

...we've talked about the deficit balance before and the effects of net interest compared to the effects of interest that is being paid to American debt holders such as intergovernmental agencies and Social Security...the two largest holders of American debt..

[Nbadan]

From top UT economists James K. Galbraith speech to the deficit commission..

Statement to the Commission on Deficit Reduction
James K. Galbraith, Lloyd M. Bentsen, jr., Chair in Government/Business
Relations, Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin
June 30, 2010


Overwhelmingly, the present deficits are caused by the financial crisis. The financial crisis, the fall in asset (especially housing) values, and withdrawal of bank lending to business and households has meant a sharp decline in economic activity, and therefore a sharp decrease in tax revenues and an increase in automatic payments for unemployment insurance and the like. According to a new IMF staff analysis, fully half of the large increase in budget deficits in major economies around the world is due to collapsing tax revenues, and a further large share to low (often negative) growth in relation to interest payments on existing debt. Less than ten percent is due to increased discretionary public expenditure, as in stimulus packages.

This point is important because it shows that the claim that deficits have resulted from "overspending" is false, both in the United States and abroad.

...


With high unemployment, high public deficits are inevitable. The only choice is between an active deficit, incurred by putting people to work or otherwise serving national needs -- such as providing a decent retirement and health care to the aged -- and a passive deficit, incurred because at high unemployment tax revenues necessarily fail to cover public spending. Cutting public spending or raising taxes, now or in the future, by any amount, cannot reduce a deficit due to high unemployment. The only fiscal effect is to convert an active deficit into a passive one -- with disastrous economic and social effects.

...


The conclusion to draw from the above argument is that large deficits going forward are likely to have the same source as they do right now: stubbornly high unemployment.

The only way to reduce a deficit caused by unemployment is to reduce unemployment. And this must be done with a substantial component of private financing, which is to say by bank credit, if the public deficit is going to be reduced. This is a fact of accounting. It is not a matter of theory or ideology; it is merely a fact. The only way to grow out of our deficit is to cure the financial crisis.

To cure the financial crisis would require two comprehensive measures. The first is debt restructuring for the entire household sector, to restore private borrowing power. The second is a reconstruction of the banking system, effectively purging the toxic assets from bank balance sheets and also reforming the bank personnel and compensation and other practices that produced the financial crisis in the first place. To repeat: this is the only way to generate deficit-reducing, privately-funded growth and employment.

...


The usual "solvency" arguments directed at the Social Security system and at Medicare as separate entities are in any event complete nonsense. These programs are just programs, like any others, in the Federal Budget, and the Social Security and Medicare "systems" are thus fully solvent so long as the Federal Government is. Further, as explained below, under our monetary arrangements there is no "solvency" issue for the federal government as a whole. The federal government is "solvent" so long as U.S. banks are required to accept US. Government checks -- which is to say so long as there is a Federal authority in the Republic. This point has been demonstrated repeatedly in times of stress, notably during the Civil War and World War II.

...


Most informed laymen believe that the Federal government must borrow in order to spend. They believe that the interest rate on Treasury securities is set in a market for government bonds. The markets impose discipline on the government. Thus their idea is that "fiscal responsibility" will produce low long-term interest rates and tolerable borrowing conditions for the federal government, while "irresponsibility" will be punished by higher, and eventually intolerable, debt service costs.

Accepting this view for the moment, what does the present level of long-term interest rates tell us? As I write, thirty year Treasury bonds are yielding just over four percent -- or just a little more than half their yield a decade back. On the argument just given, this must be an extraordinary success of virtuous policy. It seems that Wall Street has made a strong vote of confidence in the fiscal probity of our current policies. This vote is unqualified, backed by money, contingent on nothing. It therefore represents a categorical rejection, by Wall Street itself, of the CBO's doomsday scenarios and all other deficit-scare stories.

On this theory, it follows that the mandate to reduce the primary deficit to zero by 2015 is unnecessary. Such an action can hardly reduce interest rates -- neither short nor long-term -- which are already historically low.

But wait a minute, some may say. Yes interest rates are low at the moment. But bond markets are fickle, they can turn on a dime. And what then?

Yes, it is possible that interest rates could rise. But the problem with this argument is that it takes us away from the premise of rationality. If bond markets are fickle and arbitrary, who is to say what they will do in response to any particular policy? In the face of irrational markets, the sensible policy is to borrow heavily for so long as they are offering a good deal. One may say that all good things end, and perhaps they will. But if markets are irrational, then by construction you cannot prevent this by "good behavior."

The conclusion from this section is that one cannot logically argue that markets insist on deficit reduction. Either the markets are rationally unworried about deficits, or they are acting irrationally right now, in which case they can hardly "insist" on anything.

...


We can conclude that there is actually no economic justification for the target of reducing the primary deficit to zero by 2015 or any other date. The right economic objectives are to meet real problems, not those conjured from thin air by economists. Bringing about a rapid end to unemployment, caring properly for an aging population, cleaning up the Gulf of Mexico, coping with our energy insecurity and with climate change are all far more important objectives than reducing a projection of future budget deficits.

...


You are plainly not equipped by disposition or resources to take on the true cause of deficits now and in the future: the financial crisis. Recommendations based on CBO's unrealistic budget and economic outlooks are destined to collapse in failure. Specifically, if cuts are proposed and enacted in Social Security and Medicare, they will hurt millions, weaken the economy, and the deficits will not decline. It's a lose-lose proposition, with no gainers except a few predatory funds, insurance companies and such who would profit, for some time, from a chaotic private marketplace.

Thus the interesting twist in your situation is that the Republic would be better served by advancing no proposals at all.

Newdeal20 (http://www.newdeal20.org/wp-content/uploads/2010/06/deficitcommissionrv.pdf)

[Winehole23]

Thus the interesting twist in your situation is that the Republic would be better served by advancing no proposals at all. Deficit dove. Big whup.