Wednesday, October 3, 2012

Taxmageddon: T - 88 Days And Counting

The American Tax Rocket: Launch date Jan, 2013

The largest tax hikes in the history of America is about to take effect. They will hit families and small businesses in three great waves on Jan. 1, 2013. Wealthy taxpayers will see a big jump in their tax bills under President Obama's latest budget proposal, according to a new independent analysis. 

The First Wave: 

Expiration of 2001 and 2003 Tax Relief. In 2001 and 2003, the GOP Congress enacted several tax cuts for small business owners, families, and investors (later re-upped by President Barack Obama and Democrat Congress in 2010). 

The Happy New Year tax hikes will occur at 12:01 am Jan. 1, 2013: Personal income tax rates will rise. The top income tax rate will rise from 35 percent to 39.6 percent (this is also the rate at which the majority of small business profits are taxed). The lowest rate will rise from 10 percent to 15 percent.

                      REMEMBER; WHO SAYS IT BETTER? 

                               RIGHT TO YOUR FACE: 

All the rates in between also will rise. Itemized deductions and personal exemptions will again be phased out, which has the same mathematical effect as higher marginal tax rates. So, if you need a chart to see this and where your income falls, then look below and gauge yourself.
                The full list of marginal rate hikes is below: 

           The 10 percent bracket rises to a new and expanded 15 percent
                    The 25 percent bracket rises to 28 percent
                    The 28 percent bracket rises to 31 percent
                    The 33 percent bracket rises to 35 percent
                    The 35 percent bracket rises to 39.6 percent

Higher taxes on marriage and familyThe “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of taxable 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. 

Not even the dead are immune, The Middle Class Death Tax; is currently 35 percent with an exemption of $5 million ($10 million for married couples). For those dying on or after Jan. 1, 2013, and there will be a-lot of people that'll live beyond this date, 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 23.8 percent in 2013. 

The dividends tax; will rise from 15 percent this year to 43.4 percent in 2013. This is because of scheduled rate hikes plus Obamacare’s investment surtax. You know Jimmy Carter is somewhere smiling from ear-to-ear saying "Son, you make me proud". 

Second Wave: 

The Obamacare law contains 21 new or higher taxes on American families and small businesses. 

Taxpayers are reminded that the president’s healthcare law is one of the largest tax increases in American history.

Arranged by their respective effective dates, below is the total list of all $500 billion-plus in tax hikes (over the next ten years) in Obamacare, where to find them in the bill, and how much your taxes are scheduled to go up as of today:

Taxes that took effect in 2010:

1. Excise Tax on Charitable Hospitals (Min$/immediate): $50,000 per hospital if they fail to meet new "community health assessment needs," "financial assistance," and "billing and collection" rules set by
 HHS. Bill: PPACA; Page: 1,961-1,971.

2. Codification of the “economic substance doctrine” (Tax hike of $4.5 billion). This provision allows the IRS to disallow completely-legal tax deductions and other
 legal tax-minimizing plans just because the IRS deems that the action lacks “substance” and is merely intended to reduce taxes owed. Bill: Reconciliation Act; Page: 108-113.

3. “Black liquor” tax hike (Tax hike of $23.6 billion). This is a tax increase on a type of bio-fuel. Bill: Reconciliation Act; Page: 105.

4. Tax on Innovator Drug Companies ($22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year. Bill: PPACA; Page: 1,971-1,980.

5. Blue Cross/Blue Shield Tax Hike ($0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services. Bill:
 PPACA; Page: 2,004.

 Tax on Indoor Tanning Services ($2.7 billion/July 1, 2010): New 10 percent excise tax on Americans using indoor tanning salons. Bill: PPACA; Page: 2,397-2,399.

Taxes that took effect in 2011:

 Medicine Cabinet Tax ($5 bil/Jan 2011): Americans no longer 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). Bill: PPACA; Page: 1,957-1,959.

8. HSA Withdrawal Tax Hike ($1.4 bil/Jan 2011): Increases 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. Bill: PPACA; Page: 1,959.

Taxes that took effect in 2012:

9. Employer Reporting of Insurance on W-2 (Min$/Jan 2012): Preamble to taxing health benefits on individual tax returns. Bill: PPACA; Page: 1,957.

Taxes that take effect in 2013:

10. Surtax on Investment Income ($123 billion/Jan. 2013): Creation of a new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income: Bill: Reconciliation Act; Page: 87-93.

Capital Gains
2013+ (current law)
2013+ (Obama budget)

Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. The 3.8% surtax does not apply to non-resident aliens.

11. Hike in Medicare Payroll Tax ($86.8 bil/Jan 2013): Current law and changes:

First $200,000
($250,000 Married)
All Remaining Wages
Current Law
2.9% self-employed
2.9% self-employed
Obamacare Tax Hike
2.9% self-employed
3.8% self-employed

Bill: PPACA, Reconciliation Act; Page: 2000-2003; 87-93

12. Tax on Medical Device Manufacturers ($20 bil/Jan 2013): Medical device manufacturers employ 360,000 people in 6000 plants across the country. This law imposes a new 2.3% excise tax. Exempts items retailing for $100. Bill: PPACA; Page: 1,980-1,986

13. Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI ($15.2 bil/Jan 2013): Currently, those facing high medical expenses are allowed a deduction for medical expenses to the extent that those expenses exceed 7.5 percent of adjusted gross income (AGI). The new provision imposes a threshold of 10 percent of AGI. Waived for 65 years old or, older taxpayers in 2013-2016 only. Bill: PPACA; Page: 1,994-1,995

14. Flexible Spending Account Cap – aka “Special Needs Kids Tax” ($13 bil/Jan 2013): Imposes cap on FSAs of $2500 (now unlimited). Indexed to inflation after 2013. 

The Next Generation Of Inmate
There is one group of FSA owners for whom this new cap will be particularly cruel and disregarding to 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. Bill: PPACA; Page: 2,388-2,389

15. Elimination of tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D ($4.5 bil/Jan 2013) Bill: PPACA; Page: 1,994. Now Who's Pushing Granny Over The Cliff?

16. $500,000 Annual Executive Compensation Limit for Health Insurance Executives ($0.6 bil/Jan 2013). Bill: PPACA; Page: 1,995-2,000

Taxes that take effect in 2014:

17. Individual Mandate Excise Tax (Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the higher of the following:

1 Adult
2 Adults
3+ Adults
1% AGI/$95
1% AGI/$190
1% AGI/$285
2% AGI/$325
2% AGI/$650
2% AGI/$975
2016 +
2.5% AGI/$695
2.5% AGI/$1390
2.5% AGI/$2085
See ya around gramps

Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS).Bill: PPACA; Page: 317-337

18. Employer Mandate Tax (Jan 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $2000 for all full-time employees. Applies to all employers with 50 or more employees. If any employee actually receives coverage through the exchange, the penalty on the employer for that employee rises to $3000. If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).Bill: PPACA; Page: 345-346

The Congressional Budget Office recently estimated that 
six million American families will be liable for the tax, and as Americans for Tax Reform has pointed out, 100 percent of Americans filing a tax return (140 million filers) will be forced to submit paperwork to the IRS showing they had “qualifying” health insurance for every month of the tax year. (Bill: PPACA; Page: 317-337).

Combined score of individual and employer mandate tax penalty: $65 billion/10 years.

19. Tax on Health Insurers ($60.1 bil/Jan 2014): Annual tax on the industry imposed relative to health insurance premiums collected that year. Phases in gradually until 2018. Fully-imposed on firms with $50 million in profits. Bill: PPACA; Page: 1,986-1,993

Taxes that take effect in 2018:

20. Excise Tax on Comprehensive Health Insurance Plans ($32 bil/Jan 2018): Starting in 2018, new 40 percent excise tax on “Cadillac” health insurance plans ($10,200 single/$27,500 family). Higher threshold ($11,500 single/$29,450 family) for early retirees and high-risk professions. CPI +1 percentage point indexed. Bill: PPACA; Page: 1,941-1,956

Obama has also signed into law more new or higher taxes on the American people. The full list is below:

21. A 156 percent increase in the federal excise tax on tobacco: On February 4, 2009, just 16 days into his administration, Obama signed into law a 156 percent increase in the federal excise tax on tobacco, a hike of 61 cents per pack. The median income of smokers is just over $36,000 per year.

First $200,000
($250,000 Married)
All Remaining Wages
Current Law
2.9% self-employed
2.9% self-employed
Obamacare Tax Hike
2.9% self-employed
3.8% self-employed

Bill: PPACA, Reconciliation Act; Page: 2000-2003; 87-93

Third Wave

The Alternative Minimum Tax (AMT) and Employer Tax Hikes. When Americans prepare to file their tax returns in January of 2013, 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 following.

The AMT will snatch-up 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 grab a handful of taxpayers.

Full business expensing will disappear. In 2011, businesses can expense half of their purchases of equipment. Starting on 2013 tax returns, all of it will have to be “depreciated” (slowly deducted over many years).

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.

Sorry if you libs cannot swallow the truth or feel that this won't have an adverse impact on the economy....please wake up from your trance and find a clue.     

         Do Not Allow The Re-Election Of This President

           OR: This Will Be Our Nightmare Come True

Obama Says: "Right now, companies get tax breaks for moving jobs and profits overseas. Meanwhile, companies that choose to stay in America get hit with one of the highest tax rates in the world. It makes no sense, and everyone knows it."

Actually: Companies don't get tax breaks for moving anything overseas. Rather, they face double taxation when they try to bring foreign-earned profits back here to America. America is one of the only countries in the world which seeks to tax income coming back home from overseas.

A U.S. company earning a profit in France first pays French corporate income tax. If they leave that money there, they never pay taxes again. 

But if they want to bring that money back home to create jobs, invest in new plant and equipment, or shore up pension plans, they have to pay a second layer of tax to the IRS.

Obama also has said: "From now on, every multinational company should have to pay a basic minimum tax."

They Do: Large companies have very high average effective tax rates. Some liberal groups have cooked the books to make it look otherwise. 

For example, the most common liberal numbers put U.S. taxes paid in the numerator, but worldwide global profits in the denominator. Of course it looks artificially small. We have the highest corporate income tax rate in the developed world (nearly 40 percent when state corporate income taxes are included).

Obama says he wants to "Expand tax relief to small businesses that are raising wages and creating good jobs."

So why does the president wants to raise the top two individual tax rates, which is the tax rate paid by the majority of small business profits? Are you starting to see any of the deceit?

Obama Says: "We have subsidized oil companies for a century. That’s long enough. It’s time to end the taxpayer giveaways to an industry that’s rarely been more profitable, and double-down on a clean energy industry that’s never been more promising. Pass clean energy tax credits and create these jobs."

Well: An employer keeping their own money is not a subsidy. Energy companies that manufacture oil don't receive any welfare benefits from the federal government.

Obama also has said: "Right now, our most immediate priority is stopping a tax hike on 160 million working Americans while the recovery is still fragile. People cannot afford losing $40 out of each paycheck this year. There are plenty of ways to get this done. So let’s agree right here, right now: No side issues. No drama. Pass the payroll tax cut without delay."

The fact is; The U.S. House passed a one-year extension of the payroll tax holiday in December. The Democrat Controlled Senate did not. The President's complaint should not be directed anywhere but at Harry Reid, or is Harry doing as he was told?

Obama Says: "Right now, we’re poised to spend nearly $1 trillion more on what was supposed to be a temporary tax break for the wealthiest 2 percent of Americans."

Here we go again; Congress only put a time limit on the 2001 and 2003 tax relief because of Senate Democrat filibustering. These tax rates have been in place for more than a decade, and extended several times by Congresses controlled by Republicans, Democrats, and split control. 

President Obama himself signed an extension of these tax rates just one year ago. His actions are the exact opposite of what he says.

Here's another silly statement from Obama: "Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households. Right now, Warren Buffett pays a lower tax rate than his secretary." This is the same lie I've covered and debunked on multiple occasions.

Have you ever noticed how Obama doesn't mention how capital gains and dividend taxes (which drive down average tax rates for the households Obama is referring to) are a second layer of tax on corporate profits?

The real capital gains and dividends rate is closer to 45 percent. 

Second, you can't raise taxes on "the rich" without also raising the tax rate assessed on the majority of small employer profits and on the businesses employing the majority of small business employees.

Third, it's unfair to count both the employer and the employee "half" of Social Security tax payments when comparing Warren Buffett to his secretary — half is notionally paid by the employer, and doesn't directly reduce employee paychecks in the near term; also, there is a Social Security benefit in the future that should be considered.

Obama is also a master at flipping words, read this one: "Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else — like education and medical research; a strong military and care for our veterans? Because if we’re serious about paying down our debt, we can’t do both."

According to Dan Mitchell of the Cato Institute, and everyone else that's ever ran a business, this isn't true. You can prevent all scheduled tax hikes from happening, grow spending at 2 percent annually, and still balance the budget after 10 years.

Obama wants "Tax reform to follow the Buffett rule: If you make more than $1 million a year, you should not pay less than 30 percent in taxes."

Reality: Capital gains and dividends already face a tax rate of 45 percent when properly understood as the second layer of the 35 percent corporate income tax rate. Enough already; plain and simple,,,He's going to take your money no matter what you make. A broke people in a Broken country will be seen as property or asset, either way, you are enslaved. 

In an attempt to garner bipartisan support Obama Claims his friend Republican Tom Coburn is right: Washington should stop subsidizing millionaires. In fact, if you’re earning a million dollars a year, you shouldn’t get special tax subsidies or deductions."

Reality: Senator Coburn probably does want to see a net tax hike on small employers, but that doesn't mean they are getting a subsidy. They are keeping their own money.

Obama claims that "If you make under $250,000 a year, like 98 percent of American families, your taxes shouldn’t go up. You’re the ones struggling with rising costs and stagnant wages. You’re the ones who need relief."
President Obama made a "firm pledge" not to raise "any form" of taxes on families making less than $250,000 when running for President in 2008. Yet 16 days into his administration, he raised taxes on smokers, who have an average income of about $30,000 per year.

Then, he raised seven more taxes on these families as part of his jobs-killing Obamacare law.

Obama also says that "We don’t begrudge financial success in this country. We admire it. When Americans talk about folks like me paying my fair share of taxes, it’s not because they envy the rich. It’s because they understand that when I get tax breaks I don’t need and the country can’t afford, it either adds to the deficit, or somebody else has to make up the difference .

Then why if President Obama doesn't want to claim deductions, he doesn't have to. 

If he or Mr. Buffett want to pay more in taxes, they can send a check to the Treasury today.

I could go on forever with this topic, but I have a class to go teach, I'll educate y'all after lunch. 

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