Posts Tagged ‘Health Care Reform’

My prediction: Taxes are going up

President Barack Obama was reelected president and Democrats maintain control of the Senate.  Republicans still have majority in the House.  While this may mean that nothing as significant as the Affordable Care Act will pass again (at least within the next two years), it also means a complete repeal is unlikely.  All those tax increases start next year in 2013.  In addition, Californians just passed a new tax primarily aimed at the “wealthy”.  The President wants to tap the wealthy too!  Here’s a run down of what’s in store, just to name a few new taxes: 

         California Prop 30 increases CA taxes on earnings over $250,000 for single taxpayers ($500,000 joint filers) retroactively beginning January 1, 2012, and increases sales tax by 0.25% beginning 2013

         “Bush-era” tax cuts expire end of 2012 bringing tax rates up across the board, restoring the “Marriage Penalty”, and increasing tax rates on capital gains and dividends

         The “Affordable Care Act”  imposes a new Medicare tax on investment income and the “wealthy” commencing 2013

         Estate taxes increase and the gift exclusion decreases by over $4 million!

         Payroll tax holiday (we’ve been paying 2% less in social security taxes) expires after 2012 

If I had to guess at what the future holds, I think Congress will pass the President’s proposal which extends the Bush tax cuts for lower to middle income families but increases taxes on the upper income levels. 

Here is a table that may help show the federal increases visually:

 

2012 rates

Affordable Care Act increases

Expired cuts increased rates by

2013 rates

President’s Proposal

Individual tax rates (income ranges for MFJ as of 2012)

 (2)

      $0 – $17,400

10%

 5%

15%

10%

      $17,400 – $70,700

15%

15%

15%

   $70,701 – $142,700

25%

 3%

28%

25%

  $142,701 – $217,450

28%

 3%

31%

28%

  $217,451 – $388,350

33%

 3%

36%

33%

      $388,350 +

35%

 4.6%

39.6%

36%

 

39.6%

 
Capital gains

15%

3.80% (1)

5%

23.80%

23.8%

Dividends

15%

3.80% (1)

25%

43.40%

43.4%

Medicare tax – high wage earners

1.45%

0.90% (1)

2.35%

2.35%

Estate tax

35%

20%

55%

Lifetime gift exclusion

           5,120,000

         1,000,000

 (1)   Individuals will pay an additional 0.9% Medicare Hospital Insurance (HI) tax on wages and self-employment income on amounts earned above certain threshold amounts: 1. $250,000 for joint returns; 2. $125,000 for married filing separate; and $200,000 for all others. To the extent that the amount of the income exceed the threshold, the tax on investment income is 3.8% of the lesser of:

1.      Net investment income, or

2.      The excess of modified adjusted gross income (MAGI) over a threshold amount. 

(2)   Income ranges differ from 2012 income ranges 

Here is a table that shows the CA Prop 30 increases (taxable income ranges): 

Prop 30 (effective January 1, 2012)

$250,001 -$300,000 for single/MFS

10.3% (1% increase)

$340,001 – $408,000 for HOH
$500,001 – $600,000 for MFJ
$300,001 -$500,000 for single/MFS

11.3% (2% increase)

$408,001 – $680,000 for HOH
$600,001 – $1,000,000 for MFJ
More than $500,000 for single/MFS

12.3% (3% increase)

More than $680,000 for HOH
More than $1,000,000 for MFJ

 

 

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