Undoctrination.org

In just three months, on January 1, 2011, the largest tax hikes in the history of America will most likely take effect.

They will hit families and small businesses in three great waves.

On January 1, 2011, here’s what happens:

First Wave:

Expiration of 2001 and 2003 Tax Relief

In 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 only, there is no death tax.  (It’s a quirk!) 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, a business, a retirement account, could easily pass along a death tax bill to their loved ones.  Think of the farmers who don’t make much money, but their land, which they purchased years ago with after-tax dollars, is now worth a lot of money.  Their children will have to sell the farm, which may be their livelihood, just to pay the estate tax if they don’t have the cash sitting around to pay the tax.  Think about your own family’s assets.  Maybe your family owns real estate, or a business that doesn’t make much money, but the building and equipment are worth $1 million.  Upon their death, you can inherit the $1 million business tax free, but if they own a home, stock, cash worth $500K on top of the $1 million business, then you will owe the government $275,000 cash!  That’s 55% of the value of the assets over $1 million!  Do you have that kind of cash sitting around waiting to pay the estate tax?

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:

Obamacare

There 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 not be used to pay for this type of special needs education.

The HSA (Health Savings Account) 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 IRAsand other tax-advantaged accounts, which remain at 10 percent.

Third Wave:

The Alternative Minimum Tax (AMT) and Employer Tax Hikes

When 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 ”depreciate”) equipment purchases up to $250,000.

This will be cut all the way down to $25,000.  Larger businesses can currently expense half of their purchases of equipment.

In January of 2011, all of it will have to be “depreciated.”

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.

PDF  Version  Read more: <http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171#>; http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171##ixzz0sY8waPq1

But wait – there’s more!

Now, your insurance will be INCOME on your W2′s!

One of the surprises we’ll find come next year, is what follows – - a little ”surprise” that 99% of us had no idea was included in the ”new and improved” healthcare legislation . . . the dupes, er, dopes, who backed this administration will be astonished!

Starting in 2011, (next year folks), your W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are given by the company. It does not matter if that’s a private concern or governmental body of some sort.

If you’re retired?  So what… your gross will go up by the amount of insurance you get.

You will be required to pay taxes on a large sum of money that you have never seen.  Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt.  That’s what you’ll pay next year.

For many, it also puts you into a new higher bracket so it’s even worse.

This is how the government is going to buy insurance for the15% that don’t have insurance and it’s only part of the tax increases.

Not believing this???  Here is a research of the summaries…..

On page 25 of 29: TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec. 9001,
as modified by sec. 10901) Sec.9002  ”requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income.”

Now, many Americans don’t pay any taxes. The ones who actually have a job, have an amount withheld from their pay check and at the end of the year, they get most – if not all, of that back in the form of a “refund.” Those of you who fall into this category don’t know or even care about the tax changes. But you might want to re-read the above, because even the 10% bracket is in for a hike. Those of you who don’t work, and live off the government in the form of welfare, housing stipends, WIC, or Social Security may see these changes as beneficial. Entitlement programs continue to grow – using these penalties on productive citizens as the fertilizer.

But for at least some of us, we look at these changes as dangerous to the “pursuit of happiness.”  Let’s say I sold a successful business in 2008.  I’ve spent some time working for my acquirer and now I am thinking of a new venture. I have another idea – I’ve come up with a new and better thing-a-ma-bob.

Under the old tax code, if my business failed, I lost 100% of course.  But if it succeeded, they took 20%.  15% for federal plus 5% for the state (states may vary).  Hmm, the risk and reward is biased against me from the start, but what the heck, I am an entrepreneur and am used to this type of risk with the prospects of gain.

But under the new code, the same thing is true if I fail – I lose 100%.  But in 2011 or 2012, the punishment for success isn’t 20%, but will be 26.6% (the state’s cut is a percentage of the federal).  If I can’t sell off or abandon the venture until 2013 or later, then the penalty goes up to over 30%.

But it gets worse.  Some proposals call for eliminating the special status of capital gains and want to make it taxed the same as ordinary income.  So that would push up the penalty to about 50% if we include state.

But it gets worse.  Some proposals call for uncapping FICA and SS taxes, currently capped at around $100K income.  If this passes, then add another 16% which would SET THE PENALTY FOR SUCCESS TO OVER 66%, OR TWO-THIRDS of your prospective profits.

How do you make a business plan in this environment?  And let’s assume that you are perfectly altruistic and only start a company so the likes of the people who vote for Pelosi and Reid can have one more new and improved thing-a-ma-bob. Usually you need investors.  What investor in his right mind would risk 100% loss in case of failure against 33% gain in case of success?!?  And do it with a long-shot startup?!?

This is what the people who build this country and the products and services that drive our economy face, folks. Hope and change? Not in a good way …

It seems this Administration and Congress have focused on “transference of wealth” to the point of forgetting what made America great in the first place. Minds like Thomas Edison. Henry Ford. Ideas like mass production and the incandescent light.

Trying to re-create a society that has no “lower class” is simply stupid. And to do so by penalizing those who roll up their shirt sleeves and actually DO something is criminal.

Next month, we have what many consider the most important elections of our lifetime. Remember that when you go to polls. Don’t blindly vote for anyone just because of the initial after their name or because you “think” they have a better chance of winning than the candidate that actually makes sense, because that’s like digging your own grave.