With Democrats in control of both houses of Congress and Obama now the president, all Americans including the middle class are facing the prospect of new taxes types and increased tax liabilities from rate increases and the phase out of beneficial tax provisions. These changes include both direct taxes like income and excise taxes. Consider what has happened already in 2010.
A new tax on individuals who do not purchase government-approved health insurance
A new tax on employers who fail to buy government approved health insurance
A 40% tax on high cost health plans, but with an exemption for union members
A .9% increase in Medicare tax on wages and self-employment income
A new 3.8% surtax on certain investment income
An increase from 7.5% to 10% of income the threshold for deducting medical expenses
A new $2,500 annual cap on Flexible Spending Account contributions
An excise taxes on brand name pharmaceuticals
An excise taxes on medical devices including wheelchairs
A 10% federal tax on indoor UV tanning services
A new tax on insured and self?insured health plans
A doubling of the penalty for non?qualified HSA distributions
Most Americans will be subject to the impact of more than 1 of these new tax provisions. However, the problem for Americans does not stop here. There are the prospects for further tax hardship unless Congress takes action. Consider:
Additional Possible tax Changes in 2010 include:
The Alternative Minimum Tax (AMT) will decrease from $46,700 to $33,750 for single filers and from $70,950 to $45,000 for married couples filing jointly.
Taxpayers will not be allowed to deduct their state and local general sales taxes from their federal income tax.
Businesses will not be able to claim a tax credit for research, experimentation, and development activities.
Taxpayers will not be able to claim a deduction for qualified tuition and expenses.
School teachers will no longer be able to write off books, supplies and other equipment
Five year depreciation of farm machinery and equipment will expire.
Donations of books to public schools (K-12) will no longer be eligible for an enhanced charitable deduction.
In 2011 pursuant to present law the following will occur:
The 35% income tax bracket will increase to 39.6%.
33% bracket will increase to 36%.
28% bracket will increase to 31%.
25% bracket will increase to 28%.
10% and 15% brackets will condense to 15%.
The child tax credit will decrease from $1,000 to $500.
The marriage penalty tax will be restored, charging married couples a higher tax rate than individuals on the same total income.
The “death” tax returns with a 55% maximum rate and a $1 million exemption, after years of decreasing “death” tax rates.
The dependent care tax credit will decrease from $3,000 to $2,400.
The energy efficient home appliance tax credit will expire.
The tax credit to hire unemployed veterans and disconnected youth will expire.
The Work Opportunity Tax Credit, which allows employers to credit up to 40% of the first-year wages of a new employee, will expire.
The $400 “Making Work Pay” Tax Credit will expire.
With record breaking deficits and looming unfunded entitlement programs liabilities moving closer, the prospects for Congress to chnage the tax path we are on is unlikely. In an era of 1 party control, Americans now see what havoc can be wrecked on their balance sheets. And Obama is just another on a long list of elected officials who broke very specific campaign pledges. Expect more to come.
This November I believe that we will witness a backlash across both parties against incumbents. The prediction that the Democrats will suffer the greatest loss in both houses is warranted. It is under their leadership and control that this is all happening.