Brace For Taxmageddon 2013
Should Congress fail to act before the end of this year you’ll see the largest increase in taxes in American history… a mind-numbing 1/2 TRILLION dollar tax increase in one year!
It will begin on January 1, 2013 and will affect each and every income earning U.S. citizen and all their dependents.
It required a perfect storm of political short-sighted blundering to bring it about, but never shirking from a challenge, the Congress and the President have risen to the occasion!
Why the huge tax increase?
Major factors come to loggerheads the end of this year to create a $494 billion dollar tax increase:
- Bush-era tax cuts expire
- Payroll tax holiday expires
- Alternative Minimum Tax increases
- Affordable Care Act taxes kick in
- ARRA “Stimulus” tax cuts expire
These tax increases come from highly divergent sources coalesced over the last three years which nobody, if they had planned ahead, would have ever allowed to happen.
The main culprits for all these coming tax increases are:
- Economic Growth and Tax Relief Act of 2001
- Jobs Growth and Tax Relief Act of 2003
- American Recovery and Reinvestment (ARRA “Stimulus”) Act of 2009
- Affordable Care (Obamacare) Act of 2010
- Job Creation Act of 2010
- Budget Control Act of 2011
Its the direct bumbling actions of Congress over the last 3 years, signed by the President, that created the approaching calamity.
Bush-Era Tax Cuts
The Bush-era tax cuts were sweeping, across the board, tax cuts for all Americans enacted by two laws. One was passed in 2001 and the other 2003. They were never really intended to expire but, like a carton of milk, they had an expiration date of 2011 built in.
In one of many contentious recent year compromises, they were extended another two years at the very last minute in December 2010 by the Job Creation Act of 2010.
The jig is up again on December 31st. Every American will see a tax increase without changes.
Payroll Tax Holiday
This idea originated with ARRA’s passage in February 2009. In ARRA it was called an $800 dollar payroll tax “credit” that lasted two years.
In another of endlessly contentious fights, the Job Creation Act of 2010 extended the payroll tax holiday through 2011 after ARRA’s expired. The tax “holiday” was bigger than ARRA’s “credit”.
Then, it took two more contentious arguments and two compromise laws, but the 2011 payroll tax holiday was finally extended to the end of 2012.
This one definitely will not go any further… its bankrupting Social Security.
Alternative Minimum Tax(AMT)
AMT is a special tax created in 1969 specifically to make the rich, as President Obama would say, “pay their fair share”. Its an add-on to the tax code.
It sets a minimum income limit above which the wealthy are subject to an entirely different – EVEN HIGHER – tax structure than normal.
The problem is that middle income Americans keep making higher wages and keep creeping above the AMT minimum level to become subject to AMT.
You’d think that over 43 years the Congress would have have figured out to tie the AMT limit to the rate of inflation… but that would have been… wellll… smart!
Instead Congress chooses to manually raise the AMT limit to prevent the middle class from paying taxes at the higher rate.
They do that to retain control over the AMT limit so it can be manipulated for political purposes.
By January 2013, there will be almost $119 billion worth of manipulation needed or the middle class gets socked in the nose.
Affordable Care Act Tax Increases
The next batch of Obamacare tax increases come online in 2013. But those mostly affect just rich people and companies who don’t “pay their fair share” anyway… so why care about that?
Ain’t nationalizing health care wonderful?
ARRA Tax Cuts Expire
Most folks don’t know that about $298 billion of the cost of the American Reinvestment and Recovery Act (“The Stimulus”) came from tax breaks and benefits.
For example, Solyndra not only got a half billion dollars in direct loan guarantees from the federal government through ARRA, but it also got tax breaks and credits as well through ARRA.
Thank goodness it went belly up and cost taxpayers only $535 million before it could cost taxpayers even more through tax breaks.
Anyway, the last of the ARRA tax breaks end on December 31st.
There you have it. Taxmageddon Awaits!
How much confidence do you have that Congress won’t screw up again this time?
Wait! What’s that gentle rapping, rapping at your chamber door? Tis a Taxmageddon, nothing more!
Perhaps we will all be lucky and the world is destroyed when the Maya calendar recycles on December 21st, 2012.
Perhaps… just perhaps… that is what Congress is counting on.