The Proposed Tax Changes

The Proposed 2013 Tax Changes Are Only Weeks Away

(SXXW28G5BWN3) The powers that be are still trying to work out how they can forestall the fiscal cliff but everyone should be prepared for the consequences.

English: President Barack Obama speaks to a jo...
English: President Barack Obama speaks to a joint session of Congress regarding health care reform (Photo credit: Wikipedia)

The Congress and President Obama are wondering how they can ward off the impending fiscal cliff, in a matter of days the tax cuts that were implemented by Bush will come to an end and spending will be slashed as the year comes to an end, no one knows what this round of cuts will bring.

J.D. Foster a senior fellow at the Heritage Foundation feels that the proposed changes will affect everyone, income tax rates will rise, payroll tax will shoot up and capital gains and dividend taxes will be higher. The proposed changes are going to have an impact on child tax credit too; so many families are going to be badly hit.

Taxation experts feel that the proposed tax changes could be delayed if the powers that be do not come to an agreement in the next month. Under normal circumstances tax filing starts at the beginning of the year but as things stand the IRS and tax-prep companies cannot complete tax forms.

This has an impact on employers who may need to make adjustments to payroll taxes when the proposed 2013 tax changes are implemented. In short this could mean that tax preparers will struggle to be ready in time. The government will find that their revenue is delayed and taxpayers may find that refunds are paid out far later.

Learn About The Buffett Rule

Learn About The Buffett Rule

Watch out for debate misdirection when it comes to taxes. Dr. Cornwall wants everyone to know that there will never be a tax increase on the extremely wealthy population (The Buffett Rule) that will put the tiniest dent in the tax shortfall of the United States.

So why is everyone so focused on the debate about making those who bring home over $250,000 a year pay more in taxes?

The answer is the Buffet Rule by President Obama. This Buffett Rule raises the taxes on a group of extremely wealthy people, but we hear that many of them would be glad to pay more in taxes.

We are also hearing that this group is about two percent of the population of taxpayers. In all honesty, they are about 1.8% of the population that pays taxes. They are over two and a half million people according to data provided by the IRS.

The deficit right now is $1.1 trillion. That is $440,000 for each wealthy household a year. There will not be any type of increase in taxes that can resolve this tax situation.

If you are wondering whom the two and half million super wealthy people are, according to surveys from the Spectrem Group up to twenty five percent of them are entrepreneurs. These professionals are the people we need to be expanding their businesses so that our economy can get better.

So why are political figures trying to soak the rich?

President Barack Obama and Warren Buffett in t...
President Barack Obama and Warren Buffett in the Oval Office, July 14, 2010. (Photo credit: Wikipedia)

I am a believer that this is just a set up for what we can expect in our future. This is just a way to get started on the real tax increase so that the masses will be more open to it.

There have been many talks about using a value added tax system for our tax burdens right now so that we can fund our federal government. It is surprising how little attention the press is paying to the VAT tax. What we are mostly hearing about is in regards to taxing the very wealthy.

The VAT tax has not been a favorite choice for Democrats because of it being such a flat tax. This European method is going to need to be covered if they decide to add it America’s tax system.

In the next few months, this is what I see happening…

There will be an agreement that the top marginal rates will have to be increased to at least where they were before the Bush tax cuts. This will be the Democratic cover.

After that, the VAT tax will be implemented. Republicans will be able to say that even if they did not want to raise our taxes, we should be happy that they did so by implementing a flatter tax system instead of huge increases in income tax rates.

When this happens, America will be facing an expanding government that has a new tax program for politicians to use however they see fit.

Mitt Romney and The Debt Ceiling Deal

COLUMBUS GROVE, OH – AUGUST 25: Republican vice presidential candidate U.S. Rep. Paul Ryan (R-WI) speaks to supporters on August 25, 2012 in Columbus Grove, Ohio. Ryan and presumptive Republican presidential nominee, former Massachusetts Governor Mitt Romney, are campaigning together leading up to the Republican National Convention beginning August 27 in Tampa, Florida. (Image credit: Getty Images via @daylife)

The Debt Ceiling Deal

On Sunday September 9th 2012, presidential nominee Mitt Romney denounced the debt ceiling deal that helped to avert an overwhelming government debt default in the US. This despite the fact that one of the deals supporters is his current running mate Paul Ryan.

Mitt Romney called the deal between the White House and the congressional Republicans “a mistake”. He went on to say that the deal would cut our defense budget badly.

Lawmakers agreed to the deal at the 11 hour back in August 2011. The agreement was for $1 trillion in spending cuts over the next 10 years. This followed by the promise to impose another 1.2 trillion to deficits. Paul Ryan backed last year’s deal while head of the House of Representatives Budget Committee.

Romney stated that he thought the deal was a mistake on the part of the White House, and a mistake on the part of the Republicans to go along with it.

Paul Ryan said on CBS recently that he supported the deal because they needed to find common ground with President Obama and the Democrats. But that Republicans had proposed ways of cutting back wasteful Washington spending.

Mitt Romney told NBC that the White House’s sequestration plan of $1.2 trillion would severely cut our defense budget. Unless automatic spending cuts are implemented by year’s end, beginning Jan 2nd $1.2 trillion over ten years would come out of our defense budgets, not affecting 2011 taxes.

After Fierce Contention Over Payroll Tax, GOP Plays Offense To Dems.

With reputations damaged after payroll tax cut squabbles, Republicans in congress fight to change topics by emphasizing job creation. Pushing legislation that would bring jobs to the suffering economy, the GOP contends that bills promoting energy and transportation services, as well as lowering business tax and promoting capital, will reinvigorate the weak job market.

On the other hand, Democrats fight to retain control by forcing the Republican vote on needed programs paid for by tax hikes on the highest wage earners, in an election year nonetheless.

Both legislative positions emphasize political strategy drawn from the fight over payroll. The battle came to a close Friday evening after Congress utilized bipartisan compromise to deliver President Obama a bill totaling 143 billion in revenue. The package is intended to keep jobless benefits for those without work, stop cuts in Medicare reimbursement, and extends a 2 percent tax cut for payroll.

Before rescinding their demands that payroll tax cuts be paid for by lowering government spending, Democrats had succeeded in painting the Republicans as opposing middle class tax brakes for over 160 million people. The GOP seeks to redirect voters to Obama’s failures on the economy, taking attention off the party’s dismal showing in an election year.

As Republicans fight to preserve jobs and lower 2012 taxes, Dems seek to extend unemployment benefits and medicare provisions that many Americans depend on. With Republican measures in danger, there is little likelihood Republican energy bills will pass the Senate let alone get Obama’s signature. However, Republicans hope to make the best of the situation by showing they are in favor of job creation.

A Recent Poll Shows Popularity Of The Millionare Tax

Most people agree with President Obama’s plan to require millionaires to put a significant amount of their income toward their 2012 taxes. However, the same people would prefer to see a cut in spending rather than a millionaire tax to help balance the federal budget. These results come from an Associated Press-GfK Poll.

The survey shows that Obama’s millionaire tax plan has a lot of support. However, his plan has not changed people’s opinions on how to bring down the budget deficit. United States deficits have been larger than $1 trillion dollars a year. Sixty-five percent of the people polled agreed with President Obama’s plan to tax millionaires at a rate equal to 30 percent of their income. According to the poll, only 26 percent of those surveyed were against the idea.

Interestingly, 56 percent of those polled preferred spending cuts rather than hikes in 2012 taxes to fix the budget. Thirty-one percent of those polled preferred tax hikes. This same question was asked a year ago, and the response changed only slightly.

The poll further showed that the majority of people have a more favorable view of Democrats than they do of Republicans. This should be good news for President Obama as we enter election season. According to the poll, 54 percent of those surveyed gave the Democrats good ratings and 46 percent of those surveyed gave Republicans favorable ratings.

Although Obama has little chance of having his proposal passed by Congress during the campaign season, it serves as a Democratic rallying cry. It also shows a stark contrast between Democrats and Republicans who would like to lower the tax rate for millionaires. It will be interesting to see how these issues are approached during the election.

Taxes And The Proposed Tax Rates

The President Plans to Double Tax Rates for the Wealthy

President Obama is planning to tax income from capital gains as ordinary income. This will increase the top tax rate to 39.6 percent. These changes are meant to raise taxes of up to 1.4 trillion from top earners over the next decade.

Couples earning more than 200,000 annually will be required to treat income from dividends as ordinary income. According to the president, this would raise 206.4 billion dollars over the next decade.

According to Gene Sperling, the country cannot afford to lose 206.4 billion dollars on its revenue budget  by offering lower tax rates and tax cuts to top earners.

The president plans to increase the top tax rate to 39.6 percent by next year from the prevailing top rate of 35 percent. Capital gains would be taxed at a top rate of 20 percent from the prevailing 15 percent.

As part of his healthcare law, the president plans to increase the unearned income tax rate by 3.8 percent for couples earning at least 200,000 annually. Experts predict that in the next financial year, some taxpayers will have to pay federal taxes amounting to 43.4 percent on their dividends. This is almost an increase of 300 percent of what they are currently paying.

Pre-2003 Taxation

These proposals would return tax rates to pre-2003 levels. Proponents of these changes claim that it will promote a more efficient and just allocation of capital.

Generally, the president intends to reduce tax deficit on 2012 taxes by taxing the wealthy.

President Obama recently stated in a speech that the government does not need to continue offering tax cuts to individuals who are already doing very well.

There are many other changes in the tax codes that the Obama Administration is proposing.

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