|
DEMOCRATS’ TICKING TAX BOMB, PART I
Overview: Americans to Pay Higher Taxes Starting January 1, 2011
Get ready to pay higher taxes in 2011 thanks to Democrats in Washington. Starting January 1, 2011 – less than six months from now – an unprecedented, $3.8 trillion tax increase is scheduled to kick in, affecting every American who pays income taxes. This Democrat tax hike will force hard-working Americans to pay over $200 billion in higher taxes next year alone.
What are some of these tax increases? They include:
|
Higher Income Tax Rates on ALL Americans Who Pay Income Taxes
|
|
Individuals and Small Businesses*
with Taxable Income in the Following Ranges…
|
… Pay This Statutory Rate on that Range of Income in 2010…
|
…But will Pay This Statutory Rate on that Range of Income in 2011
|
|
Up to $8,375 for single filers and
Up to $16,750 for married couples
|
10%
|
15%
|
|
Between $8,375 and $34,000 for single filers and
Between $16,750 and $68,000** for married couples
|
15%
|
15%
|
|
Between $34,000 and $82,400 for single filers and
Between $68,000** and $137,300 for married couples
|
25%
|
28%
|
|
Between $82,400 and $171,850 for single filers and
Between $137,300 and $209,250 for married couples
|
28%
|
31%
|
|
Between $171,850 and $373,650 for single filers and
Between $209,250 and $373,650 for married couples
|
33%
|
36%
|
|
Over $373,650 for both single filers and
married couples
|
35%
|
39.6%***
|
Dollar amounts listed in the table above will be indexed for inflation in 2011. Amounts listed for married couples are for married couples filing joint returns.
*According to the Joint Committee on Taxation (JCT), 94% of all U.S. businesses in 2007 were S corporations, partnerships, or sole proprietorships – “pass-through” business types commonly used by small businesses – that file their taxes on their owners’ individual Form 1040s and pay taxes at the individual tax rates.
** Because of one of the marriage penalties that will be reinstated (see below), this $68,000 amount will drop to $58,200 in 2011, meaning that a married couple with as little as $58,200 in taxable income will be subject to the higher 28% rate on their next dollar earned, rather than the 15% rate.
*** Because of the reinstatement of additional, hidden tax rates (see below), while the top statutory rate will be 39.6% in 2011, the top effective rate will actually be 41.6%.
|
Higher Taxes if You Are Married
|
|
For Married Couples
Filing Jointly, the Marriage Penalty Is Reinstated With Respect To...
|
2010
|
2011
|
|
The Standard Deduction
|
Singles: $5,700
Married: $11,400
No marriage penalty because the standard deduction for married couples is twice the standard deduction for singles
|
Singles: $5,800
Married: $9,750
Marriage penalty is reinstated because the standard deduction for married couples is $1,850 less than twice the standard deduction for singles
|
|
The last dollar of income
taxed at the 15% rate
(instead of at 25% in 2010
or at 28% in 2011,
the next highest tax rate in effect)
|
Singles: $34,000
Married: $68,000
No marriage penalty because the last dollar of income taxed at 15% (instead of at 25%, the next highest rate) for married couples is twice the corresponding amount for singles
|
Singles: $34,850
Married: $58,200
Marriage penalty is reinstated because the last dollar of income taxed at 15% (instead of at 28%, the next highest rate) for married couples is $11,500 less than twice the corresponding amount for singles
|
Dollar amounts listed in the table above for 2011 are JCT estimates reflecting expected inflation adjustments.
|
Higher Taxes if You Are A Parent
|
|
Pro-family Tax Benefit
|
2010
|
2011
|
|
Child Tax Credit
|
$1,000 per child
|
$500 per child
|
|
Higher Taxes on Investments that Grow the Economy and Create Good Jobs
|
|
Investment Incentive
|
2010
|
2011
|
|
Top rate on long-term capital gains
|
15%
|
20%*
|
|
Top rate on qualified dividends
|
15%
|
39.6%*
|
* Because of the reinstatement of additional, hidden tax rates (see below), while the top statutory capital gains rate will be 20% in 2011, the top effective rate will actually be 22%. For dividends, while the top statutory rate will be 39.6% in 2011, the top effective rate will actually be 41.6%.
Note that, under the Democrats’ new health law, beginning in 2013, investment income will be subject to an additional 3.8% surtax for single taxpayers earning more than $200,000 and married couples earning more than $250,000. This will bring the top statutory rate on capital gains to 23.8% and the top statutory rate on dividends to 43.4% in 2013. Because of the additional, hidden tax rate increases described below, however, the top effective rate on capital gains will be 25.8% in 2013, and the top effective rate on dividends will be 45.4%.
|
Higher Taxes through Additional, Hidden Tax Rate Increases
|
|
Hidden Tax Rate Increase Reinstated
|
Individuals and Small Businesses*
with Adjusted Gross Income…
|
… Pay this additional, hidden
tax rate increase in 2010…
|
… But pay this additional, hidden tax rate increase in 2011
|
|
Personal exemption phase-out (PEP)
|
Above $171,000 for single filers and
Above $256,700 for married couples
filing jointly
|
None
|
Approximately 0.8%
|
|
Pease limitation on itemized deductions (such as mortgage interest, charitable contributions, and state and local taxes)
|
Above $171,000 for both single filers and
married couples filing jointly
|
None
|
Approximately 1.2%
|
|
Top effective marginal tax rate on income (including dividend income) in 2011,
including reinstatement of these hidden tax rate increases:
39.6% (top statutory rate)
0.8% (PEP)
+ 1.2% (Pease limitation)
41.6%
|
*According to the Joint Committee on Taxation (JCT), 94% of all U.S. businesses in 2007 were S corporations, partnerships, or sole proprietorships – “pass-through” business types commonly used by small businesses – that file their taxes on their owners’ individual Form 1040s and pay taxes at the individual tax rates.
Dollar amounts listed in the table above are JCT estimates for 2011 reflecting expected inflation adjustments.
Note that, under the Democrats’ new health law, beginning in 2013, dividend income will be subject to an additional 3.8% surtax for single taxpayers earning more than $200,000 and married couples earning more than $250,000. Factoring in the additional, hidden tax rate increase described in this table, the top effective rate on dividends will be 45.4% in 2013.
|
Resurrection of the Death Tax
|
|
Estate Tax Provision
|
2010
|
2011
|
|
Exemption amount
|
N/A – Death Tax repealed
|
$1 million
|
|
Top rate
|
N/A – Death Tax repealed
|
55%
|
For examples of how these looming tax hikes will affect typical American taxpayers, stay tuned for Part II of this series, coming soon.
###
|
|
|
The Tax Tracker
|
|
|
|
DEMOCRATS’ TICKING TAX BOMB, PART II
How the Democrats’ Year-end Tax Hike Will Affect Typical Taxpayers
As described in Part I of this series, starting January 1, 2011, Washington Democrats will impose a $3.8 trillion tax hike on hard-working Americans. This tax increase will affect every American who pays income taxes through higher tax rates on individuals, families, and small businesses. Married couples and parents will be singled out for even higher taxes, and there will be significant tax hikes on the very investments that grow the economy and create good jobs. Even the death tax – repealed entirely for 2010 – will be resurrected on January 1, 2011. So far, Democrats have done nothing to disarm this ticking tax bomb.
So how will the family budgets of typical taxpayers be affected by these looming Democrat tax hikes?
- A family of four earning $50,000 per year could pay more than $2,100 in higher taxes.
- A single mom earning $36,000 per year could pay over $1,100 more in taxes.
- Married senior citizens earning $40,000 per year could pay more than $1,400 in higher taxes.
Here are the details:
|
Typical Tax Return #1: Middle-income family of four
|
|
Filing Status: Married, filing joint return
Children: 2
Adjusted Gross Income: $50,000
|
|
|
Without Democrats'
2011 Tax Hike
|
With Democrats'
2011 Tax Hike
|
|
Standard deduction
|
$11,600
|
$9,750
|
|
Personal exemptions
|
$15,000
|
$15,000
|
|
Taxable income
|
$23,400
|
$25,250
|
|
Tax liability
|
$2,652
|
$3,788
|
|
Child credit (non-refundable portion)
|
$2,000
|
$1,000
|
|
Total tax
|
$652
|
$2,788
|
|
Democrats' 2011 tax increase: $2,136
|
Calculations are based on Joint Committee on Taxation (JCT) estimates of various tax parameters reflecting expected inflation adjustments for 2011.
|
Typical Tax Return #2: Modest-income single parent
|
|
Filing Status: Head of Household
Children: 1
Adjusted Gross Income: $36,000
|
|
|
Without Democrats'
2011 Tax Hike
|
With Democrats'
2011 Tax Hike
|
|
Standard deduction
|
$8,600
|
$8,600
|
|
Personal exemptions
|
$7,500
|
$7,500
|
|
Taxable income
|
$19,900
|
$19,900
|
|
Tax liability
|
$2,373
|
$2,985
|
|
Child credit (non-refundable portion)
|
$1,000
|
$500
|
|
Total Tax
|
$1,373
|
$2,485
|
|
Democrats' 2011 tax increase: $1,112
|
Calculations are based on Joint Committee on Taxation (JCT) estimates of various tax parameters reflecting expected inflation adjustments for 2011.
|
Typical Tax Return #3: Married senior citizens
|
|
Filing Status: Married, filing joint return
Children: 0
Adjusted Gross Income: $40,000, including $5,000 in dividends
($100,000 invested, 5% yield)
|
|
|
Without Democrats'
2011 Tax Hike
|
With Democrats'
2011 Tax Hike
|
|
Standard deduction
|
$13,800
|
$13,800
|
|
Personal exemptions
|
$7,500
|
$7,500
|
|
Taxable income
|
$18,700
|
$18,700
|
|
Qualified dividends
|
$5,000 taxed at 0%
(special rate for taxpayers
in the 10% or 15% brackets)
|
$5,000 taxed at 15%
(ordinary income rate)
|
|
Total tax
|
$1,370
|
$2,805
|
|
Democrats' 2011 tax increase: $1,435
|
Calculations are based on Joint Committee on Taxation (JCT) estimates of various tax parameters reflecting expected inflation adjustments for 2011.
While the effect of these Democrat tax increases on any particular taxpayer’s family budget will depend on that taxpayer’s specific facts and circumstances, these typical tax returns make clear that this is a massive tax hike that the American people simply can’t afford.
As these examples show, married couples and taxpayers with children will be hit particularly hard by the Democrats’ tax hike. For more detail about the re-imposition of the marriage penalty and the reduction in the child credit scheduled for January 1, 2011, stay tuned for Part III of this series, coming soon.
###
|
|
Ways and Means Republican Press Office
www.Republicans.WaysandMeans.House.Gov
202.226.4774
|
Click Here to view this email in your browser
Click Here to be removed from this list
|
