We are more than halfway through 2010 and quickly moving toward the largest tax hike in American history. The healthcare reform bill and the so-called “stimulus” act was conveniently hidden in a menagerie of tax reforms under our noses and a large chunk of our citizenry never knew what happened.
I always liked the Robin Hood theory of “rob from the rich to give to the poor” until I actually realized what that meant to the American economy. President Obama made the declaration that American taxpayers need to “spread the wealth around” meaning “all you hard-workin’, careful savers just got the rug pulled right under you. Tricked ya’!!!” When the “have’s” get hit with higher taxes in this country, then the middle class and the poor pay a high price with the loss of jobs and tax revenue to state and city coffers. Incomes shrink, the cost of living skyrockets and everyone suffers.
Lower income families will no longer be taxed just 10%, but their federal tax rate will go up to 15%. If you are single and earn $9,350 or more annually, you can count on losing an extra $500 this year. Most individuals with this level of income do not have tax deductions such as school loans or property taxes, making this especially difficult for them.
The next two tax brackets, at 28% and 31% will affect the majority of hard-working American tax-payers. They will bear the brunt of lost income to federal taxes AND the state taxes that will follow on the heels of the federal taxes. Most states are already in the red and will need the tax revenue, so those unlucky citizens with state income tax will bear an even greater crushing burden. This obviously means we will be paying more for our already strapped household incomes. Of course, the more you earn, the more taxes you pay individually. For those business owners, not only do they pay taxes on their livelihood but they bear the burden of the taxes on their businesses as well. If big corporations and small business are paying more in taxes or losing tax deductions, there is less of an incentive to create more jobs and this cost will have to be passed on to the consumer. It is an ugly, deadly cycle.
The programs that are currently in place, as well as new programs that will soon go into effect, will bankrupt this country. On top of this mountain of bad news, we have to consider that America also gives billions of dollars in aid to foreign countries every year that either don’t need it, or hate the United States. For example, we gave Mexico alone roughly $60 million of aid in 2007, but the exact number seems to be hard to pin down for 2008 and 2009. And here’s the million, or should I say the billion dollar question….Do you know who pays for all this aid? (Drum roll!!!!!) You do! We aren’t just supporting our own programs but we help other nations as well, and if you’ve heard the angry, frightened citizens on the street you can see an explosion in the making.
The following are all going into effect in 2011:
- Child tax credit will go from $1000 to $500.
- Over the counter drugs (for example; children’s Tylenol, Advil, etc…) that could once be claimed with your Flexible Spending Accounts are gone!
- Brand name drugs across the board are going to be taxed in the “billions” of dollars which, of course, will raise the cost of medications. Generic forms of these drugs usually do not go into effect until a drug has been on the market for at least ten years.
- HSA withdrawals for non-medical expenses will go from 10% to 20%
- Employee Substance Doctrine (businesses need to watch this one); IRS can make the decision that once “legal” deductions can be categorized as lacking “economic substance.”
- AMT (Alternative Minimum Tax) will go from 4 million American families to 28.5 million American families. This means that American families will have to calculate their tax burdens twice and pay at a higher level.
- Small business expensing will disappear by 50% and equipment purchases that cost, for example, $250,000 can only be deducted at $25,000.
- Loss of the Experimentation and Research tax incentive–why would you make a product if you don’t have the incentive?
- Education and Teaching tax benefits have been reduced. Deductions for tuition and fees will no longer be available. Teachers will no longer be able to claim classroom expenses. Employer-funded education assistance has been curtailed. Student loan interest deductions will no longer be allowed for thousands of American families.
- IRA charitable contributions from retirees can no longer be deducted if it is $100,000 or less – it’s gone!
These are just a few of the changes coming. For those of you thinking that these policies are not going to affect you, it’s time to get out of denial. This congress and administration is going to destroy your way of life, pure and simple. While our previous administration put us in a deficit with the cost of a war, they did, however, give us tax cuts. Those cuts are due to expire this year. Some of us are barely surviving financially now. How will you make it next year? On a side note, remember that if you receive government assistance, for example, unemployment benefits, you will still have to claim that as income next year on your return. Go to www.IRS.gov, or www.atr.org (Americans for Tax Reform) to check out more.