Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Are You Ready for Taxmageddon?

Politics / Taxes Jun 05, 2012 - 08:13 AM GMT

By: Money_Morning

Politics

Best Financial Markets Analysis ArticleDon Miller writes: A slow moving train wreck known as "Taxmageddon" is creeping toward U.S. taxpayers.

You see, if Congress doesn't act by year's end, numerous tax breaks will expire -- and hit every American taxpayer squarely in the wallet.


It's a fiscal tsunami that will strike as early as December. The damage will be so widespread it could derail the entire U.S. economy.

Nobody in Washington, however, is doing anything about it.

"You just don't get the sense that there's even a secret plan yet," Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, told The Washington Post. "It's scary."

If you're not worried yet, you should be.

Here's why...

"Taxmageddon" Means Higher Taxes for All
The Bush-era tax cuts will end on Jan. 1, 2013, unless Congress intervenes.

Also set to expire that day will be a temporary payroll-tax holiday on social security.

The tax changes won't just slam a few income brackets; they'll reach all taxpayers.

Every one of the existing income tax brackets will be ratcheted up, starting with the lowest 10% bracket, which will be hiked to 15%. The 25% bracket will jump to 28%; the 28% bracket will go to 31%; the 33% bracket will be replaced by a 36% bracket and the 35% bracket will soar to 39.6%.

Stock market investors will also be punished.

Right now, the maximum tax rate on long-term capital gains and dividends is only 15%. Starting next year, the maximum rate on long-term gains is scheduled to increase to 20%.
But get this -- the maximum rate on dividends will skyrocket to a whopping 39.6%.

That's not all.

Investors in the two lowest income brackets who currently pay 0% will have to shell out 10% on long-term gains and 15% and 28% on dividends.

The death of the Bush tax cuts also kills temporary federal estate and gift tax breaks and a measure to ease the marriage penalty for low and middle income couples.

On top of that, workers will lose a 2% cut on social security taxes. That means an average $1,000 tax increase come Jan. 1 for virtually all workers.

In other words, if Congress fails to act, "Taxmageddon" assures that we will all be paying higher taxes next year.

Driving off a "Fiscal Cliff"
Not only are taxes scheduled to go up, but the entire economy could be crippled by a slate of automatic spending cuts set to take effect on Jan. 1, 2013.

Roughly $1.2 trillion in government spending cuts will kick in, stemming from the failure of last summer's "super committee" to produce a deficit-cutting agreement.

A Congressional Budget Office report issued last month said the economy would shrink by 1.3% in the first half of next year if our legislators drive us off this so-called "fiscal cliff."

Washington is already filled with people warning of disaster if the cuts go into effect. Hospital executives have besieged Washington with complaints about scheduled cuts in Medicare. Officials at colleges and universities from around the country are raising red flags over big cuts in federal research grants.

Executives from Lockheed Martin Corp. (NYSE: LMT) and other aerospace companies even passed out digital countdown clocks ticking off the seconds until "over 1 million American jobs" will be lost to Defense Department budget cuts, The Washington Post reported.

"How do you plan for chaos?" Marion Blakey, president of the Aerospace Industries Association, posed to the Post during a break between meetings with lawmakers last week. "There's so much at stake. And there's nothing that inspires confidence that this will get done."

In fact, the uncertainty may already be hurting the economy.

Many businesses say they will consider laying off workers or cut back on capital spending before the end of the year if Congress doesn't act.

Stalemate in Washington
Meanwhile, the Democratic Senate and the Republican House seem more interested in drawing lines in the political sand than finding meaningful solutions.

The White House and Senate Majority Leader Harry Reid, D-NV, insist they won't take action on the expiring tax cuts or the spending cuts unless Republicans agree to put higher taxes on the table.

For their part, Republicans are focused on the national debt, which is set to exceed its legal limit in January -- right when the spending cuts and tax hikes will hit.

"You can call this a fiscal cliff...or Taxmageddon," said Sen. Orrin Hatch, R-UT. "Whatever you call it, it will be a disaster for the middle class. And for the small businesses that will be the engine of our economic recovery."

Most observers believe legislators won't do anything until after the November elections.
More likely, the whole mess will be kicked down the road so the newly-elected Congress and whoever occupies the White House can deal with it in 2013.

Maybe it's time to send a message to your current Congressman to do something to defuse the ticking Taxmageddon time bomb.

Source :http://moneymorning.com/2012/06/05/are-you-ready-for-taxmageddon/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in