Are you ready for your tax hike??

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. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.

Read more: www.atr.org...##ixzz0zTsqlbZZ

I thought this was a good explanation of tax increases coming our way on January 1st.. Aside from paying much more on Income tax, less deductions, the effects on my HSA have me fuming mad... because if you don't use the money you put into the account by years end the Government steals it.. so if I'm fortunate enough not to need expensive medical care.. wtf am I supposed to do with my account? Just let the Government have my money? Makes the policy worthless!

On a side note.. the Tanning Tax is hilarious. Stupid, intrusive, but just the fact that some goofy white guys sat around a desk deliberating what to tax and they came up with ... excise tanning tax.. idiots..

These tax raises are a good thing not from the point of lossing cash but more for a revolution, your average person in the US will never revolt until they feel it in there pockets to hard stopping them from visiting the mall every weekend.

reply to post by jpmail


All this money is supposed to go into a savings fund to fund "health care" .. its unlikely to lower the deficit. In fact, it will hurt it simply because of the number of businesses that will shut down, and less spendable cash. But I agree with everything else.. it will piss people off.

You do realize right now the Democrats are looking to extend ALL of these tax breaks, plus ad additional tax breaks for small businesses?

The only ones that they are looking to let the tax breaks expire are folks making over 250k per year.

Only 2% of Americans make over 250k per year...so 98% of Americans would not see a tax increase.
en.wikipedia.org...

That of course sent the GOP into a frenzy to protect the richest Americans ..... those making over 250k per year.

Senate GOP leaders declared on Monday that Republicans are, to a person, opposed to legislation that would extend only middle-class tax relief -- which Obama has repeatedly promised to deliver -- if Democrats follow through on plans to let tax rates rise for the wealthiest Americans.

Read more: www.bnd.com...

McConnell Spokesperson: GOP Will Fight Renewing Tax Breaks
Senate Republicans will oppose any effort to renew soon-to-expire Bush administration tax cuts if upper income taxpayers are excluded from the reductions.
A spokesman for Senate GOP Leader Mitch McConnell says every Senate Republican has pledged to oppose President Barack Obama's tax-cutting plan
www.whsv.com...



The GOP is now poised to give a big middle finger to 98% of Americans

This is just another example of how the GOP claims to be for the Middle Class, but in actuallity vote as their wealthy contributors tell them to.

Good thread.

With all that said, even with the upcoming tax hikes, I still believe Americans will just sit back and take it.

Sad to say, but with everyone I've talked to, including family, older generations and newer..
They all have said the same thing.

"There's only two things you have to pay in life. Taxes and Insurance."

Talk about a programmed lifestyle!
I can't stand to hear people say these things, yet everyone I know says the exact same thing.
Pure garbage.
It's what I've been raised to think was the way of life here in America.

I believe in a flat tax, for everyone, no matter what 'income level' they make. 10%.
It's amazing that we, the people, have let this go on for this long.
No more lobbyists' bribing for more money.
No more 'earmarks' or 'pig spending'.
This is more than ridiculous.

I feel it's time for more than a revolution.

It's time for a reset.

Originally posted by maybereal11

The only ones that they are looking to let the tax breaks expire are folks making over 250k per year.

Only 2% of Americans make over 250k per year...so 98% of Americans would not see a tax increase.
en.wikipedia.org...

Not exactly.....

A limited liability company (LLC) is not a separate tax entity like a corporation; instead, it is what the IRS calls a "pass-through entity," like a partnership or sole proprietorship. All of the profits and losses of the LLC "pass through" the business to the LLC owners (called members), who report this information on their personal tax returns. The LLC itself does not pay federal income taxes, the owners do.

So you see vast amounts of small businesses owners will be effected. Most bussiness make 250K or more.

Hit these people (myself included) and we will shut down our businesses layoff our employees. Do you really think the economy could take that right now. I sure don't. They are taking the incentive to work away. We may as get on the Goverment tit also. Why work, hard working people who risk much to build a business are penalized.

edit on 14-9-2010 by VAPatriot because: Tried to get my responce out of the quote...oh well, I don't know how. I tried, sorry.

reply to post by maybereal11


Good job, you watch MSM and listen to Democrat sound bytes.

The tax increases have NOTHING to do with income.. they are targeting BRACKETS.. the are saying only those over 250k are in the highest bracket: not true. Specifically many small businesses fall into this bracket. Regardless of income.

Also, letting the tax cuts expire is one part, but its twofold.. 1st the tax cuts expire, then you add the actual tax increases from Obamacare... two different things. And if you think its only targetting "2%" of the country is goin to pay......

Sad thing is though, with out increasing taxes Obamacare will bankrupt the country.. screwed if we do, screwed if we don't.

And leaving tax cuts aside, there is a huge amount of new regulation, taxes, and fees that supplement income tax that everyone will be effected in some way.

And if that's not enough, the devalue of the dollar to pay for Obamacare will be an inflationary tax felt mostly by the middle class.

reply to post by Rockpuck


I like to deal with facts...I'll let you deal with propaganda...Fox News has taught you well.

Your fear mongering doesn't phase me.

Originally posted by Rockpuck
reply to post by jpmail

 

All this money is supposed to go into a savings fund to fund "health care" .. its unlikely to lower the deficit. In fact, it will hurt it simply because of the number of businesses that will shut down, and less spendable cash. But I agree with everything else.. it will piss people off.

Canada has been watching closely, as your economy affects ours eventually. Our news has been reporting on the US infrastructure getting too old, and that it hasn't been maintained properly. It gets really noticeable when neighbourhoods start blowing up. It was estimated 2 trillion dollars over the next few years would be needed to maintain and upgrade the bridges, gas and oil pipelines, drinking water, highways, etc......

www.ritholtz.com...

Overall, America’s Infrastructure GPA was graded a “D.” To get to an “A” requires a 5 year infrastructure investment of $2.2 Trillion dollars. Hence, you can understand if I am underwhelmed by the latest $50B proposal.

It's frightening to see our friends to the south having such difficulties because of government after government that don't know how to be fiscally responsible.

Originally posted by Rockpuck
reply to post by maybereal11

 

Good job, you watch MSM and listen to Democrat sound bytes.

The tax increases have NOTHING to do with income.. they are targeting BRACKETS.. the are saying only those over 250k are in the highest bracket: not true. Specifically many small businesses fall into this bracket. Regardless of income.

To you and the other poster on the Small Business thing..Small Bus = over 250k per year.

That is why the bill includes a tax break specific to Small businesses, leaving only individuals who make more than 250k per year (Less than 2% of Americans)

Even Forbes magazine thinks the Small Business part of the package is Awesome..
blogs.forbes.com...

Also in Forbes here
Good News, At Last, On Small-Business Taxes
www.forbes.com...

So what were you saying again about Small Business being considered individuals making over 250K?

I'll be fair. I know what you are saying, you are saying what a few less than honest GOP politicians have said, but it does not reflect the facts.

That does not appear to be true. Where did you see any tax break specific to Small businesses, leaving only individuals who make more than 250k per year (Less than 2% of Americans)

Not worth the paper it's written on. None of these will help my business.

SBA loans - Keep printing those fiats.
R&D credits - like a coffee shop or a repair service needs that.

I can see it might help me in regards to deducting my families portion of our group health insurance premium. But that's it. If you have 20 employees or less it's pretty useless.

We get taxed on profit we make, even if we re-invest the money back into the business. SBA loans won't help for very long. We need sales to grow and sustain our businesses. And the Health care bill is going to cost us big time.

It's a dog and pony show, as usual.

reply to post by VAPatriot


No offense, but your post seems to lack specifics.

I can only offer you links for you to find whatever it is you are looking for.

Are you claiming the bill doesn't exist?

Expanded deductions and expanded SBA Loans and incentives

blogs.forbes.com...

Obama Asks Congress To Pass Bills To Cut Small Business Taxes
www.nuwireinvestor.com...

thomas.loc.gov...:H.R.5486:

I won't go into much detail, because it's all there for anyone willing to google and read...and since I provided a link before and your response was pretty much that the bill doesn't exist...I don't know how to respond to that.

I have nothing to worry about because I don't make $250,000 a year. I remember Obama saying in every speech he gave during the election campaign that we would not "see" one dime in tax increases unless we made more than $250,000.

Originally posted by OutKast Searcher
reply to post by Rockpuck

 

I like to deal with facts...I'll let you deal with propaganda...Fox News has taught you well.

Your fear mongering doesn't phase me.

Its not fearmongering at all. More people than said will see tax increases. Small businesses will not be immune. And above all, for every dollar NOT taxed the government will spend anyways, thus raising the deficit, thus lowering the value of the Dollar, thus an indirect tax we will all feel.

That doesn't even get started on side taxes. Or Federal regulation such as screwing around with HSA's.

Detail your accounting this year compared to next. Whether its on a newly taxed service, increased cost of services, or a blatant increase in income tax.. somewhere you will feel it.

reply to post by maybereal11


What I am questioning is where does this bill say anything about a tax break specific to Small businesses, leaving only individuals who make more than 250k per year (Less than 2% of Americans).

I have looked and don't see that in the bill.

My point is if your small business makes 250K you will be taxed the higher rate. Maybe I'm missing that but I did look and don't see anything to support your claim.



You can't use the R&D tax credit for a coffee shop or service company.

Increase of Section 179 Expensing & Extension of Bonus Depreciation- Businesses are not buying in the last two years. Since the economy tanked and the banks are not lending.

Small-Business Lending Fund - I would not need a loan if they left the tax rate alone.

I see one item that maybe of help to a small business like mine. (deducting my families portion of our group health insurance premium).

Mostly useless incentives that can't be used by a very small business.