Massive tax increases coming

[Guest guest]

Once these taxes kick in, it will kill any real hope of economic recovery. Why would people bother to save and invest when dividends and capital gains will be so heavily, and double, taxed. I say double taxed because the corporation is taxed once with the corporate tax and the tax on dividends and capital gains on stocks is a second tax on the same economic activity. Lots of other taxes like the ones that will hurt small businesses and the death tax will also stifle the economy. I already have heard of some businesses leaving the US for Europe because the tax codes are simpler and rates will soon be lower. Add in all the coming regulations and mandated benefits, etc., and more will leave or simply fold.

What will happen then is instead of seeing tax revenues increase as the rates go up, they will plummet because economic activity has ground to a halt. Politicians, being the corrupt powermongers they are will not understand what is happening and will raise taxes again, increase regulation and send out the tax men in force to seek people they think are dodging their taxes. In reality that may well happen, but mostly it will happen because most people don't have the money to pay the taxes, especially with the AMT getting so many millions.

That Alternative Minimum Tax is a terrific example of government screwing things up. Back around 1970, government thought a handful of rich people were getting away with not paying taxes. So, instead of increasing enforcement, they put up a special tax that was based on what people earned. That number was set high for the time but no provision for inflation was made. Now, because of inflation, millions are affected by and more will be next year.

http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171

Six Months to Go UntilThe Largest Tax Hikes in History Read more: http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171#ixzz0sUD9P7IJ

First Wave: Expiration of 2001 and 2003 Tax ReliefIn 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: ObamacareThere 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 HikesWhen 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 “depreciateâ€) 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.â€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/six-months-untilbr-largest-tax-hikes-a5171#ixzz0sUD1ACCW

[Guest guest]

You are right, but there will be larger implications. It ill be a real shock to

people who got into the workforce just as the tax cuts came into effect. These

people have learned how to spend and " save " based on having an income that isn't

cut to the bone by taxes. Now these free spenders, who have already accumulated

so much debt, will be spending money like crazy not realizing how much they will

owe the government when tax season rolls around. And once they have their taxes

paid, they will still have to pay their debts. In fact, their debts may increase

because they will spend less money toward paying off debt and more toward paying

taxes.

Administrator

Once these taxes kick in, it will kill any real hope of economic recovery. Why

would people bother to save and invest when dividends and capital gains will be

so heavily, and double, taxed.

[Guest guest]

It wouldn't surprise me if they might not take out debt to pay their taxes. That could be putting the tax bill on a credit card or taking out a small loan. Either way, the amount of money people will have to spend on the economy is soon going to be pinched very tightly. If Cap and Trade goes through on top of that and the price of energy goes up, as Obama promised during the campaign that it would, people will have even less money. Throw in a VAT tax and its even less money in their pockets.

At the same time, demand for government services will increase as people find they have less money. Government will gladly give these handouts since it will mean more control and votes. However, it will only make the situation worse as government will either have to raise taxes or print more money to cover this new largess.

This reminds me of a political cartoon from the 1700's I think it was. It was called "Leviathan" and was of a great huge king on a throne with tons of food being poured into his mouth while sycophant scrambled around on the floor picking up scraps. The message was that the English government had grown too large, was soaking up too much of the economy and was leaving the people poorer and poorer the stronger and more controlling it became. Things don't change much do they? Government is expanding more and more, sucking up more of the economy while sycophants like BP, GE, the bankers and others dance around encouraging it all and fighting over scraps (government contracts and favors). Humanity never learns a damn thing and this time it might well and truly cost us as it has past civilizations.

In a message dated 7/2/2010 3:40:04 A.M. Eastern Daylight Time, no_reply writes:

You are right, but there will be larger implications. It ill be a real shock to people who got into the workforce just as the tax cuts came into effect. These people have learned how to spend and "save" based on having an income that isn't cut to the bone by taxes. Now these free spenders, who have already accumulated so much debt, will be spending money like crazy not realizing how much they will owe the government when tax season rolls around. And once they have their taxes paid, they will still have to pay their debts. In fact, their debts may increase because they will spend less money toward paying off debt and more toward paying taxes. Administrator

[Guest guest]

At the same time, demand for government services will increase as people find they have less money. Government will gladly give these handouts since it will mean more control and votes. However, it will only make the situation worse as government will either have to raise taxes or print more money to cover this new largess.

What the government should say is: YOU people brought all this debt on yourself and we absorbed it. Now you have to pay for it and no services to you in the meantime.

Keep in mind people have been racking up personal debt for decades, and the mortgage bubble was largely the result of people trying to make quick profit and turning over homes. These people were borrowing more than they could afford to borrow. As much as we say government was stupid for allowing the loosening of credit restrictions, in an ideal world, people could moderate themselves without any kind of government regulation at all. But people have no self-control, and they ought to be made to pay for this lack of self-control. (But not the rest of his who HAVE maintained self-control.

Administrator

[Guest guest]

Debt has been encouraged for decades. You could write off mortgages on your taxes, which was a major selling point. When I was looking at houses, the agent kept talking about how I could write the payments off and how the bankers later talked about taking a larger amount of money to increase that. I ended up not buying anything but I also told the agent to not talk about such things with me again in future and why.

At the same time, savings and investments were taxed and often taxed heavily. The system is also so screwed up that some people had their investments increase and then collapse in value, but the IRS still wanted to tax them at the greatest amount of capital gain even though the investor was now deep in the hole from their losses. This will only get worse in a few months when the old tax cuts on investments expire. I expect to see the market take a sharp downturn as people start selling off to beat the tax deadline. The super rich will be fine, but the majority of small and medium investors will take a beating.

We also bailed out the bad borrowers. I found that whole episode extremely amusing. The government was saying it was an emergency and we had to get checks to people NOW! The checks actually went out about 6 months later. Way to help people stay in their houses, eh? If the government had been serious about helping the economy, it wouldn't have done a bailout. If it had, it should have helped those who had long held a mortgage, had a good payment record. Give these people up to $100,000 to pay down their mortgages on the contract of not taking out a new mortgage for 4 or 5 years (though they could still sell and move). A limit of one house only as well so flippers and such couldn't abuse this. These people could then have that mortgage payment to put back into the economy through other spending or they could renegotiate the balance left on their mortgage for a lower payment rate with the same effect of increasing their disposable income.

Something else that would help, instead of useless jobs programs, especially "Green" ones here's an idea. I know that several kit type solar power systems exist. At least one of these comes in a form like a box you simply unfold to expose the panels and plug into your house. Everything else is contained in the box. Nice and neat. Why not purchase these in bulk and ship them to rural homeowners via private contractors who will site and set up the kit and for a small service contract, come by twice a year to service it? I'll bet that a great deal more panels would be put in operation that way and new private sector jobs would be created than the government made green jobs, and without the corresponding loss of regular jobs that is seen in Spain and elsewhere.

In a message dated 7/2/2010 1:10:35 P.M. Eastern Daylight Time, no_reply writes:

What the government should say is: YOU people brought all this debt on yourself and we absorbed it. Now you have to pay for it and no services to you in the meantime.

Keep in mind people have been racking up personal debt for decades, and the mortgage bubble was largely the result of people trying to make quick profit and turning over homes. These people were borrowing more than they could afford to borrow. As much as we say government was stupid for allowing the loosening of credit restrictions, in an ideal world, people could moderate themselves without any kind of government regulation at all. But people have no self-control, and they ought to be made to pay for this lack of self-control. (But not the rest of his who HAVE maintained self-control.

Administrator