Only 53% of the people who read this will find it of value, those of you who work for a living. As we approach the end of the year, it is becoming more evident that our taxes will increase next year as the President and Congress are unable to compromise and prevent the Bush era tax cuts from expiring. The President holds all the cards and doesn't really need to play with the Republicans because he's already elected for his final term in office. Last time he signed to extend the tax cuts in 2010, he needed to please the electorate - but not anymore. Sure he's thrown out a proposal, but the Republicans laughed at it. There will be no more offers from his side of the game.
If there is no compromise, the tax increases would be significant:
- FICA would go up by 2 percentage points.
- All income tax brackets would go up by 3 to 5 percentage points.
- Tax rates on capital gains would rise.
- Tax rates on dividends would more than double.
- The child tax credit drops from $1000 to $500.
- The marriage penalty would return.
The hardest hit would be two-income couples with children, but everyone would see their taxes go up.
But what does this mean? Well, if you work and contribute your payroll taxes to build our highways and pay our public servants you will pay more starting next year. For the typical middle class family, it means about $2000 will disappear from your household budget as it is earmarked for income tax. You can go to the Tax Foundation and plug in your income in this handy calculator to see the difference how much taxes you will now pay starting next year.
What would you have done with your 2K? #My2K would pay for our groceries and household supplies for an entire year, plus pay for the dog food and all our car's gasoline. Two thousand dollars would pay for two week long vacations. Two thousand dollars would pay our property taxes and half of our home insurance. Two thousand dollars would pay for our vehicle insurances. All of these bills must continue to be paid, but we won't have the income now. It will be an extra frugal year on top of our already frugal lifestyle.
What bothers me about this is not so much paying more taxes, it's that 47% of people will not be paying more. The people who suck up government services like disability, food stamps, cash assistance and section 8 housing allowances. These people probably have never worked or paid taxes. They have a bunch of kids and they get a bunch of government checks each month to buy their groceries, pay their rent and provide for their sorry existence. They will not feel the pain or have the difficult decisions to make about what they must fore go this month in order to pay the bills.
Get ready, it's going to happen.