Summary of 2011 Tax Hikes
Where are tax rates going in 2011? If you guessed “up”, you’re absolutely correct. If Congress doesn’t do anything about the Bush tax cuts which are slated to expire in 2011 here’s what happens.
The estate tax, 0% this year, will go to 55% on assets above a million dollars. Now, your estate has already been taxed. You’ve paid income taxes, property taxes, dividend taxes, capital gains taxes and you’re sitting on what’s left over and the government still wants over half of what you own when you die.
George Steinbrenner’s heirs saved $500 million dollars – that’s $500 million they wouldn’t have if George had died 6 months later.
The income tax rates, which Democrats keep insisting are “tax breaks for the wealthiest Americans” will change as follows:
- 10% goes to 15% – If you pay a 10% tax rate you are not one the “wealthiest Americans” and your tax rate is going up 50%!
- 25% goes to 28% – a 12% increase
- 28% goes to 31% – a 10.7% increase
- 33% goes to 36% – a 9% increase
- 35% goes to 39.6% – a 13% increase
Because most small business owners in America pay personal income tax rates on their business profits, this affects your bottom line. And that’s just for starters…Capital gains goes from 15% to 20% – a 33% increase
Dividend taxes go from 15% to your income tax rate – an increase of 164% for those in the highest tax bracket.
The marriage penalty comes back.
And all this is if Congress does nothing.
Republicans have been screaming to extend the tax cuts but they’re not in power. A few Democrat Senators have started to say it’s a bad idea to let the tax cuts expire, but the Obama administration appears to be in favor of extending the tax cuts only for everyone making less than the magical $200,000 ($250,000 for couples) according to Treasury Secretary Geithner.
In an interview by Jake Tapper that aired on Sunday’s This Week show on ABC Geithner was asked if the tax increase on the highest tax bracket would affect economic growth. “No… I don’t believe it will have a negative effect” Geithner replied.
Really? Of course not. The top 2-3% of Americans don’t have anything to do with saving, investing or hiring, right?
Let’s see what else the Obama administration has in store for us…
The 10% Tanning Tax went into effect July 1st (I heard a black Tea Party member call it a tax on white folks).
They’ve messed with Health Savings Accounts (HSAs) by not allowing over-the-counter medicines to be purchased with HSA money and increasing the tax penalty for early withdrawal (it turns into an IRA at age 65) from 10% to 20%.
Both the the dividend and capital gains taxes will go up again in 2013 due to a 3.8% Medicare tax (sorry, a levy) for those making more than $200,000 a year. Other tax hikes include: halving the child tax credit to $500 from $1,000 and fixing the standard deduction for couples at the same level as it is for single filers.
There’s the Brand Name Drug tax and Medical Device tax (sorry again, levies) which will increase the cost of health care.
The Alternative Minimum Tax will hit 28 million families next year, up from 4 million this year.
And the biggest change for small business? The amount you can expense rather than amortize drops from $250,000 to $25,000!
This is just a small sampling of the tax changes starting next year. My advice to you? DUCK AND COVER!
Further Reading:
The Joint Commitee on Taxation’s “List Of Expiring Federal Tax Provisions 2009-2020” (PDF)
The Tax Tsunami On The Horizon
Majority of Small Business Sector Facing Higher Taxes Under Obama Plan
Obamacare Adds A Flood Of 1099?s