Health bill care means more taxes
End of Bush tax cuts and additional Medicare tax will mean higher taxes, especially for wealthy. And inflation could push more into that group.
Have you seen the tax changes in President Obama’s health care bill?
Get ready to cough up a lot more to feed the federal trough.
Singles with an adjusted gross incomes of more than $200,000 ($250,000 on a joint return) will be hit by an additional 0.9% more tax on wages and self employment income. That’s your income before any deductions for medical expenses, taxes, interest, charitable contributions, casualty deductions and miscellaneous itemized expenses. That’s your income before any deductions for exemptions.
For the first time in history, the Medicare tax will be applied to investment earnings. All capital gains, dividends and interest will be assessed at 3.8%.
These additional taxes will start in 2013.
Remember, the Bush tax cuts expire this year. That pushes the new tax on longterm capital gains from a current cap of 15% to as much as 23.8%.
Dividends, now taxed at a cap of 15%, will be hit at ordinary income tax rates of as much as 43.4%, as the Bush era 35% maximum rate increases to 39.6%.
Remember those medical expenses that had to exceed 7.5% of your income? The new law jumps that to 10%, starting in 2013. Make sure you have a salary reduction plan (also known as a cafeteria plan with your company to avoid the whole issue.
Think these taxes will only apply to the rich?
There’s no inflation factor in the exemption amounts. You might not be generating $200,000 now, but my father supported a family of five on $5,200 a year 40 years ago. And, given the trillions being flushed into the economy that we don’t have, inflation is not too far in the future.
Time bomb, anybody? With inflation at 7.5% per year, it would take only 10 years for a family earning $125,000 to become one earning $250,000, subject to those higher taxes. Let inflation jump to 10%, and it would take less than eight years. I lived through 18% inflation under President Carter. At that rate, it would take only four years.
The best part? The IRS has been authorized to hire as many as 16,500 new auditors, agents and other employees to enforce the law. And, your new taxes will pay their salaries.
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