Tax Increases to Watch Out for in the New Year
Author: Roni Deutch
Fair Tax
You may remember hearing the phrase fair tax during the recent presidential election. Republican candidate Mike Huckabee was a large supporter of this tax, which would pretty much eliminate the current tax system, and possibly even the IRS. It may sound nice, but to make up for the lost revenue the Federal government would need to impose a 23 to 30% tax on the purchase of all goods. Although supporters say that the price of products would decline without payroll or corporate taxes, there is no way to know what the break even point would be. This new type of tax is unlikely to come to fruition in 2010 as there are no bills currently being debated in Congress. However, it may gain traction as a campaign talking point during the run-up to Congressional elections in late 2010.
Estate Taxes
Unfortunately Congress failed to take any action on the estate tax. This means that in 2010 there will be no estate tax levied whatsoever, unless Congress passes a retroactive bill. However, beginning in 2011 the estate tax will return and target even more taxpayers. If current laws are not changed, in 2011 the estate tax will return to a historic rate of 55%, and it will get levied on all estates valued at $1 million, which would represent the highest estate tax since the early 1990s. Unfortunately for anyone inheriting a sizeable estate in 2010, Democratic leaders in Congress have vowed to deal with the estate tax as soon as they return to session, which could result in a permanent 45% estate tax rate.
War Taxes
It is widely known that military spending, especially during a war, adds up quickly. Over the past eight years, the costs of the military efforts in Afghanistan and Iraq have cost an estimated $1 trillion. As such, David Obey, (D WI) chair of the House Appropriations Committee has proposed a war surtax that would range from an additional 1 to 5% income tax on the highest-earning households. Not surprisingly, there is a lot of opposition to this tax, and many experts claim that unused TARP funds could be used to pay for the military costs. On the other hand, some insist that a war tax would create a nationwide sense of urgency to end the wars.
Taxes on Stocks
One of the more popular revenue-raising ideas on Capitol Hill is to tax the sale of financial instruments like stocks, options and derivatives. The main proponents of the bill are two Democratic House members Ed Perlmutter and Peter DeFazio who have titled their bill the Let Wall Street Pay for the Restoration of Main Street Act of 2009. It would be a 0.25% tax on purchases of securities, and could potentially raise $150 billion per year. Supporters claim that the bill would deter investors from making risky moves, while critics are concerned that such a tax could lead to a market crash and ruin the countrys economy.
IRA's in 2010
Unfortunately it looks like life is going to change drastically for anyone with an IRA in 2010. Starting in the New Year, income limitations will disappear for individuals hoping to convert to a traditional IRA or tax deferred retirement plan into a Roth IRA, which lets taxpayers take untaxed withdrawals. The previous limit had only allowed taxpayers making $100,000 or less to take advantage of a Roth IRA conversion.
Patient Protection and Affordable Care Act
Like my blog entry last week on the Senates health care bill explained, any type of health care reform is going to lead to increased taxes. In the current legislation there are taxes on tanning salons, Cadillac health care plans, fees on businesses that do not provide coverage and a Medicare tax increase for individuals making over $200,000. As the House and Senate work to come up with a bill that can pass through both houses, all taxpayers should pay close attention to the tax increases that will undoubtedly accompany the legislation.
Employee Health Benefits
Although the health care reform bills do not contain any taxes on employer-provided health care, the Houses legislation does include a section that would make employers show those health care benefits on employees W-2s forms. There has been a lot of discussion in Washington about taxing employer provided health benefits, and it is definitely an issue everyone should watch out for.About the Author:
The Tax Lady
Roni Deutch and her law firm Roni Deutch, A Professional Tax Corporation have been helping taxpayers across the nation find IRS tax relief for over seventeen years. The firm has experienced tax lawyers who can fight
IRS tax liens on your behalf.
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