Wintery Knight

…integrating Christian faith and knowledge in the public square

A primer on the fiscal cliff facing us in January 2013: tax hikes and Obamacare

This is a medium-length article from the Tax Foundation. I found it fascinating to read, because I am busy making plans myself to deal with the next four years under Barack Obama.

Excerpt:

On December 31, 2012, a large swath of the federal income tax code is scheduled to expire, an event which has come to be known as the “fiscal cliff.” Among the expiring provisions are the 2001 and 2003 tax cuts enacted under President Bush, a compromise on the estate tax, a “patch” in the Alternative Minimum Tax (AMT) reducing its impact, the temporary 2 percent payroll tax holiday, increased business expensing, and the “extenders” package of miscellaneous tax deductions. On January 1, 2013, five taxes enacted as part of the Patient Protection and Affordable Care Act (PPACA)—popularly referred to as Obamacare—also take effect, along with sequester spending reductions of $109 billion due to the failure of the “Supercommittee” to reach consensus on budget reductions.

In late February, the U.S. government will hit the debt ceiling, exhausting its ability to borrow to finance ongoing spending without an increase by Congress. Finally, the federal government’s continuing resolution appropriating spending expires on March 27, 2013.

Here are some of the things to look out for, which are all described in detail in the article:

  • 2001 and 2003 Tax Cuts Expiration
  • Estate Tax Increase
  • Alternative Minimum Tax
  • Payroll Tax Increase
  • Business Depreciation Expense
  • Taxes in PPACA (Obamacare)
  • Debt Ceiling
  • Sequestration

I am most concerned about income tax increase, the capital gains tax increase, the dividend tax increase and the payroll tax increase. These are all going to clobber me. I will have less money for charity and savings, and will have to retire later – and have less time for my Christian activities as a result of having to work longer. The voters in the last election have decided that I must sacrifice more of my earnings so that Obama can hand it all out to his constituents in exchange for their votes.

It helps to know exactly what will be changing in the future, because I have to know how to respond to this. Some adjustments that I might make cannot be done at the drop of a hat. Some take months to plan and execute. It’s best to think about things in advance. We have two deadlines: December 31st and March 27th. It will be interesting to see  what Washington decides to do.

UPDATE: James Pethokoukis of AEI explains the significance of the tax increases for capital gains and dividends. Other countries have lower rates on these taxes, so expect the capital that funds businesses and creates jobs to leave the country. Obama likes to rail against outsourcing, but he actually causes it – because of his ignorance.

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2 Responses

  1. Nothing wrong with making personal plans to deal with Obamanomics, Wintery, but there are different viewing scales from which to observe any landscape. At each different scale, different details (and therefore different priorities) are made visible to the observer. To wit:

    “… the fiscal cliff would back us away from a true disaster scenario, and it would slow the growth of the government debt. Moreover, the fiscal cliff is an enormous opportunity for House Republicans. If they simply allow it to occur, they win big politically in the negotiations. They will get credit for fiscal responsibility, while the Obama administration will get the blame for the tax increases and will lose the leeway to offer new giveaways to its constituencies.”

    http://www.americanthinker.com/2012/11/the_fiscal_cliff_is_a_good_thing.html

  2. James Pethokoukis of AEI explains the significance of the tax increases for capital gains and dividends here:

    http://www.aei-ideas.org/2012/11/these-are-the-obama-tax-hikes-that-will-really-hurt/

    Other countries have lower rates on these taxes, so expect the capital that funds businesses and creates jobs to leave the country. Obama likes to rail against outsourcing, but he actually causes it – because of his ignorance.

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