While we have been discussing taxes (Fair Share and Interest Income) the past few days let’s do one more thing prior to the debate. Let’s take a look at the taxes now set to go into effect for 2013 and see if the candidates are asked to address this. We won’t touch healthcare taxes here, only payroll.
First off believe it or not the government reduced the social security tax taken from your paycheck the past two years to 4.2% from 6.2%. It was done to try and get money into people’s hands to spend in the marketplace. Think about the fact that the government decided to cut social security revenue into the system at a time the program is going bankrupt. That is another issue. For now understand that on Jan 1, the rate reverts to 6.2%. What does that mean in real dollars for you
– If you earn $35,000 your tax bill is going up by $700.00
– If you earn $110,000 it is going up by $2,202.00
This is a given so get ready.
Part two is the Bush Tax cuts. Let’s put this in perspective. In 2001 President Bush wanted to spur the economy so they reduced rates. The Democrats fought back and didn’t want the reduction. So the sides agreed on a ten year period for the rates. When the period was up they bickered but President Obama decided to extend it until Jan 1, 2013. Why? Well it was hard to think about raising rates in the economic conditions we were in and Jan 1, 2013 is two months after the election. Pretty simple. Here are the rates scheduled to expired and what you are scheduled to pay.
| Tax Brackets (2012 Dollar Amounts) | Marginal Rate | ||||
| Unmarried Filers | Married Joint Filers | ||||
| Over | But Not Over | Over | But Not Over | 2012 | 2013 |
| $0 | $8,700 | $0 | $17,400 | 10% | 15% |
| 8,700 | 35,350 | 17,400 | 70,700* | 15% | 15% |
| 35,350 | 85,650 | 70,700* | 142,700 | 25% | 28% |
| 85,650 | 178,650 | 142,700 | 217,450 | 28% | 31% |
| 178,650 | 388,350 | 217,450 | 388,350 | 33% | 36% |
| 388,350 | … | 388,350 | … | 35% | 39.6% |
The average increase is 3% for most filers with the highest income bracket going up 4.6%.
Yes this is scheduled in addition to the 2% increase on social security. So the average person faces a 5% increase.
Now follow this argument for a second.
The Democrats say this is fair share and not an increase. That the rates were a 10 year cut only and time is up.
The Republicans say it should have been permanent and that for 12 years people have paid these rates and this is an increase.
That’s not sll. On Januaary 1 the Capital Gains (Bank and Stock interest/dividends) we discussed on Friday is also going up. Here is that table:
| Maximum Rates | 2012 | 2013 | |
| Long-Term Capital Gain | 15% | 20% |
So we face a 5% Long Term (held one year or longer account or stock) increase.
Since all of the above is in place and set to take effect on Jan. 1, listen to the debate see if this is addressed and how each side will handle. Then decide. Fair share or too much? Good for the economy or bad? A job creator or job elminator?
YOUE CHOICE, OUR FUTURE