Posted on 07/06/2010 7:23:24 AM PDT by celticfreedom
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#ixzz0sub9V6vj
Thanks for posting this. It’s depressing, but all the more reason to vote Republican in November. In the meantime, I’ll increase my tax payments (sigh)...
I own a small amount of dividend-paying stock, and I make far less than $250K per year. What was that about not raising my taxes one thin dime, Obama?
Elections have consequences. The time to toss out the RINOs is in the primaries. November 2nd will be CRITICAL to the survival of the Republic. Support your local Tea Party - we absolutely MUST defeat Pelosi, Reid and 0.
Thanks McCain. You could have made these permanent.
Everybody gets to pay more so Barry Soetoro and the First Woman get to have more lavish parties and trips.
MCCain’s McCain-Feingold gave the Dems power in 2006/2008 plus O. We may have them in control forever thanks to McCain.
This is all pure B**LS**T! Rats can’t keep their hands off our money! They will turn honest citizens into criminals.....mark my words!
Why don’t the Republicans in congress put forth a bill to extend them?
Just owning stock means you are wealthy.
http://www.marketwatch.com/story/the-happiest-places-on-earth-are-heavily-taxed?fg
*gag*
I know you were being sarcastic, but $200 can get you 10 shares of a decent dividend-paying stock that pays much better than a savings account. DRIPs are an excellent way for small investors to build retirement savings over time. Of course, leftists can’t permit anyone to opt out of their government dependency plans. In 2011, the taxes on dividends will be considerably higher than on ordinary income.
"The dividends tax will rise from 15 percent this year to 39.6 percent in 2011."
If economists think we are in for a double dip recession now, wait ‘til this hits - this should drive the economy directly in the depression dumper.
woohoo.
:-(
The Bush tax cuts will be reinstated
This is going to hurt and most likely cause unemployment to rise once again. Dems are really stupid when it comes to the economy.
absolutely correct on that. Now if we can only motivate the people to quit complaining and actually DO something!
Concur. At least my local TP is active.
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