Posted on 04/30/2009 11:32:50 AM PDT by My Favorite Headache
Lots of Tax Hikes Coming in 2011
Tax increases will hit businesses and individuals, and don’t think for a minute that only the wealthy will feel the pain. By Joan Pryde, Senior Tax Editor, the Kiplinger letters
Think taxes are too high now? Just wait: Congress is all but certain to raise them a couple of years from now. Tax increases will hit both businesses and individuals -- and not just singles making more than $200,000 a year and married couples over $250,000 a year. They’ll be the first to get pinched, but not the last. There’s just not enough revenue that can be drawn from the wealthy without crippling the economy, so in time, middle incomers will feel a bigger bite, too.
Higher taxes will be part of a major overhaul designed to simplify the tax code, though it won’t do more than tinker around the edges. The legislation will have cuts as well as hikes, though more of the latter. Putting everything in a catchall piece of legislation dilutes opposition to any one unpopular provision. Figure on tax increases taking effect in 2011, assuming the economy is growing steadily. At that point, reducing the deficit will be the top priority. The debt is simply unsustainable over the long term.
Here’s what’s rising to the top of the list of probable hikes for individuals:
•Boosts in top marginal rates from 33% and 35% to 36% and 39.6%. No change in the other marginal rates seems likely.
•A higher rate on capital gains and dividends, but only for those in the top brackets. They will probably be hit with a 20% rate, though it could go a little higher.
•Caps on itemized deductions for top earners. Obama’s push to limit the value of deductions at 28% ran into a wall of opposition from charitable groups, but he’s not giving up. Some way of curtailing the tax break still seems likely by 2011.
•No repeal of estate taxes, but count on an exemption of at least $3.5 million, and it could be set as high as $5 million if the Senate prevails. Estate tax legislation will include spousal transfers, making the exemption $7 million or more for couples. The estate tax rate will be capped at 45%, the same as it is now.
•More easings for the alternative minimum tax, but no repeal.
Businesses can expect a mixed bag of hikes and cuts, but with a higher total tax bill. Among the changes:
•Higher SECA taxes for owners of S firms and partnerships by blocking them in the future from skirting payroll taxes by taking their compensation as dividends instead of salary.
•New restrictions on worker classification to make it easier for the IRS to crack down on firms that treat workers as contractors who are really employees. •And elimination of some tax breaks for big corporations, including the deduction for domestic production, accelerated depreciation and incentives for foreign income and oil production.
But there may be a silver lining, at least for big corporations: Congress will consider lowering the 35% top corporate tax rate by several percentage points.
Longer term, tax hikes will go even further and hit more people and businesses. The only other option is deep cuts in spending, including Social Security, Medicare and defense, and the public won’t buy that. As a result, anyone making more than $100,000 a year will be at risk for higher taxes. The most likely option is to raise the cap on income subject to payroll taxes. It now stands at $106,800.
The increases will make many unhappy. They already see the burden as high, a point made clearly at those “tea parties” on April 15. Lumping together income, excise, payroll and other taxes, the average rate paid today is 21¢ on every dollar of income, according to a recent Congressional Budget Office analysis of data from 2006, the most recent year for which data are available. That’s the same as in 1982, after the Reagan tax cuts, and 2¢ less than at its peak under Clinton. For the top 20% of taxpayers, the average rate is higher: 26¢. That compares with 24¢ in 1982
Raising taxes, within our present Federal Revenue system, will only make the problem worse.
We must stop spending NOW and replace our present the tax system with either a flat tax OR the “Fair Tax”.
I suspect there is an unintentional and partly subconscious groundswell of people trying to reduce “taxable” income and “taxable” spending. I am one of them. It was subconcious until I caught myself thinking that way.
It will have an impact. Craigslist and garage sales are gonna explode.
*sigh*
Even educated journalists miss the obvious!
When the 2003 tax cuts expire at the end of 2010, the federal income tax rates go back up to higher rates of the year 2000. Low income, middle income, high income will all get instantly hit with higher federal income taxes.
Everyone!!!
Fewer government services would be nice. They could start by abolishing the NEA and lots of federal departments and other state and local services.
Yah...let’s start holding our breath on that one.
I agree.
Congress can regulate commerce, and therefore transportation - ports, highways, waterways, and the airways - which only makes sense.
But there is no Constitutional requirement for the Feds to have a Department of Education or of Human Services. This is just for starters, I’m sure you can add hundreds more.
“Businesses can expect a mixed bag of hikes and cuts, but with a higher total tax bill.”
Which of course keeps the lobbying spigot wide open...
During the Depression, many barter and script systems were set up.
The 74% tax rate only applied to one person, J.Rockefeller, because he was the only one who made so much money he couldn’t find enough safe havens.
The problem the ‘progressives’ don’t realize is when you try to ‘eat the rich’, they know when to get off the plate.
Many small businesses see the writing on the wall and are going into ‘slow roll’ as they know what happens in the private sector when the public sector runs wild.
So how do we stop it? http://pushbackuntil.com
We, the people, have to take our country back from an inept and irresponsible Congress.
...and that is why we, the people, have to start pushing back. We will not take “No” for an answer.
How in the world is Obama going to be able to do that and get elected in 2012? I don’t quite understand the logic.
Millions of illegals, who do not speak English, will be legal voters and indebted to him. ACORN has been given billions in these packages, of coure for the next election cycle preparation. The endless drone of speeches that say what a good job they are doing....if you repeat something long enough people will believe it, and the Koolaid will be limitless.
Geesh. Who could have guessed?
Face it. We are all going to be slaves to taxes. Why? because there is nothing happening to change that fact.
The GOP is dead and nobody is going to fight what is coming. Why? because they have already swallowed the the new new deal without a fight.
I love the tea parties and even participated, but some timed tea parties cannot stop the daily onslaught of the evil that is going on now.
You've joined Operation Thrift. I believe most people know what's coming, and they don't want to be responsible for contributing to any of it. (It's like paying tithes to Satan.)
Those with no debt did best. They were the new rich. The rest lost everything.
It would also be a good idea to acquire knowledge, a craft, right now as well. It could be the most valuable thing you own during hard times.
Instead of buying, pay of your debts. You'll be much better off because of it.
“Those with no debt did best. They were the new rich. The rest lost everything.”
Debt slavery is no way to live.
I think it’ll be real interesting to see how this all works when people start getting in the habit of using cash instead of credit cards.
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