Posted on 07/17/2010 12:04:15 PM PDT by NaturalBornConservative
Income Tax Reality Check
Compiled by: Larry Walker, Jr.
"If you make less than $250,000, you will not see your taxes increase by one dime." ~ B. H. Obama
Left-wing pundits are claiming that the Bush tax cuts were for the wealthy, which is simply not true. Next year when the 10% tax bracket disappears, and tax rates return to pre-2001 levels, will represent an across the board tax increase affecting every American. In addition, the child tax credit will return from $1,000 (per child under age 17) to $500 representing a tax increase for everyone who has children, not the wealthy. The fact is that the Bush tax cuts applied to every American at every level of income, and when they expire taxes will rise from the bottom up.
In 2011, if you make over a nickel in taxable income, your taxes will increase a minimum of 3%, and as much as 5%. Since our tax rates are progressive, taxes on the first $16,750 for couples ($8,375 for singles) will increase by 5%. Taxpayers who make under $8,375 in taxable income will see the largest tax increase at 5%. Middle income earners will see their taxes rise by no less than 3%. The contention that the Bush tax cuts only affected the wealthy is a bald-faced lie. Similarly, the contention that Obama's tax increases will only affect the wealthy is nothing but a fairy tale. Americans are educated and can comprehend income tax tables. You can choose to believe whatever you want, but reality should not be optional.
Nickel over at fivecentnickel.com has projected how the 2011 income tax brackets may look. The commentary below is attributed to Nickel. I have retouched his 2011 table (below), and added the 2010 table (above) for comparison.
Income tax bracket changes for 2011 - In case you weren’t aware, the Bush tax cuts of 2001 and 2003 are set to expire at the end of 2010. Thus, if Congress doesn’t act, the relatively low income tax rates that we’ve been enjoying (hah! enjoying?) will soon be a thing of the past. They will be replaced by the pre-2001 tax brackets.
In other words, the 10%, 15%, 25%, 28%, 33% and 35% tax brackets that we’ve grown accustomed to will be replaced by 15%, 28%, 31%, 36%, and 39.6% brackets. It’s hard to say exactly where the income cutoffs will lie, but if we base the numbers on the 2010 income tax brackets and add 3% for inflation, the 2011 tax brackets might look something like this:
Capital gains tax changes in 2011 - Beyond the increased federal income tax brackets, the capital gains tax rates will also be changing (and not for the better). The top rate for long-term capital gains will be rising from 15% to 20%, and the 0% rate for those in the lowest tax brackets will be replaced by a 10% long-term capital gains rate.
Why worry about 2011 income tax changes? - Since the 2011 tax year is so far off, you might be wondering why we’re even talking about it right now. Well, as I noted above, the time to being planning for things like this is right now – before the changes go into effect as these potential income tax rates have the potential to take a big bite out of your savings account.
What sort of planning should you be doing? I can think of several things off the top of my head. For starters, if you’re in a position to accelerate income from 2011 into 2010, you might want to do so. In many cases this is easier said than done, but it’s worth exploring if you’d like to shield your income from the potentially higher rates.
Also, if you’re anything like me, you may wait until the end of the year to make your charitable donations. If so, then by waiting just a few more days (until January 1, 2011) to write that check, you could net a substantial tax savings. While you’d have to wait longer to claim the deduction, it might be worth it.
Similarly, if you anticipate selling investments to generate cash during 2011, you might consider moving that up to the end of 2010 to get in on the (presumably) lower capital gains tax rates.
Reference: http://www.fivecentnickel.com/2010/02/15/2011-federal-income-tax-brackets-irs-income-tax-rates/
Gee I wonder if they will correct their “tax cuts for the realty” lie after people at the bottom notice their taxes went up too?
realty = wealthy.
This is horse shit! These people won't ever pay a goddam dime in Federal Income Tax, period! Neither will the ones making up to and in some cases (many illegitimate children and no baby-daddies around [on paper, anyway], over the Federal Poverty Level. The EITC takes care of that; this is money stolen from you and me.
Look at REAL tax PAYERs, not fake payers and credit takers.
Unfortunately, for most of us working stiffs there are only two options. We can try to get lubed up first, or we can just take it dry and ignore the pain.
I’ve gone hugely galt with outgo. I’ve got to figure a way to go galt with income. It’s harder.
Unless I get laid off. ;\
Stay tuned. What the “experts” prognosticate now may yet be a pale representation of reality when the whole tax picture is finalized towards the end of the year. And then, it will change again when the new Congress is installed.
Ever changing, every vexing, with no long term commitment from the pols. That's what the taxpayer is faced with.
They theoretically get a tax increase, but what about the “Make work pay” and “Earned income tax credit” that offset any taxes paid?
Whatever! Then it will come out of their EIC refund so they will get less of a refund. Since the tables are based on taxable income, there’s no telling how much income people in this bracket made before deductions, or whether or not they have kids. Young single folks without kids, or homes generally get slammed on taxes.
I thought someone might say “horseshit” to my statement that the maximum increase will be 5%. It’s a progressive tax so it’s really a combination of the increase in the applicable brackets that will determine the effective increase. Too many variables to pinpoint.
“Ever changing, every vexing, with no long term commitment from the pols. That’s what the taxpayer is faced with.”
Yep. By the time we get another 2,500 page piece of uncertaintly (i.e. tax bill), it will be too late to plan for anything. That’s why most people that I know, including myself, have placed all plans on hold. The pols should have put this as a priority so that we would know which direction to take.
“Ever changing, every vexing, with no long term commitment from the pols. That’s what the taxpayer is faced with.”
Yep. By the time we get another 2,500 page piece of uncertaintly (i.e. tax bill), it will be too late to plan for anything. That’s why most people that I know, including myself, have placed all plans on hold. The pols should have put this as a priority so that we would know which direction to take.
‘go galt with income’ - That’s easier when you work for yourself. But you can still max out a 401k, and/or IRA; or perhaps invest in rental property, or other ventures to lower taxable income currently and defer it until Obama gets repealed.
This author needs to go back to school to learn some mathematics. If your taxes go from 10% to 13%, they don’t go up by 3%. They go up by 30%. This will be quite a shocker when folks find this out for real come January.
This puts the lie to the crap that the Bush tax cuts were for the rich. Bullsh!t. They were for everybody. And everybody is about to find that out for real.
“This author needs to go back to school to learn some mathematics.”
The author is an accountant. School has never ended for me.
“If your taxes go from 10% to 13%, they don’t go up by 3%. They go up by 30%.”
True if you’re talking about the ‘rate of change’, however, if you are talking about the marginal increase in the amount of income going to the government (which I am) based on the change in tax brackets, the answer is 3% (13 - 10), as demonstrated by ones effective tax rate having been 10%, and now being 13%. Telling people that their taxes are going up by 30% to 50% serves no purpose.
If you are driving a car at 10 MPH, and you increase to 13 MPH, would you say that you are now travelling 30% faster, or would you say that you increased your speed by 3 MPH? You make a valid point, relatively speaking, but I don’t appreciate the bashing.
“They were for everybody.”
I believe that’s what I said. “The contention that the Bush tax cuts ‘ONLY’ affected the wealthy is a bald-faced lie.” That’s another way of saying that they affected everyone.
Your excellent reply was much better than my off-the-cuff comment, and I appreciate your taking the time to set me straight.
I should read more carefully. I didn’t mean to insult you. I said the author of another thread was on crack, so I could have scotched this one much worse.
:^)
Apology accepted. I think we’re on the same page. Feedback helps make us all better, most of the time anyway.
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