Naive Middle Class American Taxpayers

The Obama Tax Bill will arrive in your middle class mailbox soon. Economists are warning that Congress’s fix to prevent falling off the fiscal cliff could take much more cash from the taxpayers’ wallets than generally recognized – as much as $2.2 trillion over 10 years – and may significantly slow economic growth. The full effects of the new tax laws are emerging. Reflecting the progressive nature of the new tax structure, the Tax Policy Center estimates that workers earning between $50,000 and $75,000 will pay an about $822 more in taxes this year. A taxpayer with an income of $1 million will pay an additional $170,000. The biggest surprise for taxpayers? Despite both parties’ promises during the campaign that taxes would not go up for middle-income wage earners, The Tax Policy Center reports taxes will rise for over 77 percent of taxpayers, mostly because of the expiration of the payroll tax holiday. While the number crunching continues, the tax bite of the 157-page American Taxpayer Relief Tax Act of 2012. includes: About $160 billion of revenue this year due to the expiration of the payroll tax “holiday,” which increases the payroll tax that helps fund Social Security from 4.2 percent to 6.2 percent. According to the Tax Policy Center, this increase will actually hit lower- and middle-income taxpayers harder. Then there is the $62 billion annually due to hiking the top marginal income-tax rate paid by the wealthy from 35 percent to 39.6 percent. Add $15 billion a year from limiting, by a “personal exemption phase out,” or PEP, the exemptions and deductions that wealthier families can claim - the tax bill would rise by about $1,000 according to a Wall Street Journal calculation. Don't forget the $5.5 billion raised by increasing the tax rate for capital gains and dividends from 15 percent to 20 percent (in addition to the 3.8 percent surcharge on investment income for the wealthy, which will kick to help cover the cost of Obamacare). Another $2 billion annually will be collected by increasing the top rate for gift and estate taxes from 35 to 40 percent. The bottom line of the new taxation: less economic growth. “Compared to what the economy would have been had we extended all tax policies,” Heritage Foundation Senior Policy Analyst and tax expert Curtis S. Dubay told Newsmax, “we’re going to have a slower growing economy, we’re going to have fewer jobs, less opportunity for Americans of all income levels.” But Obamacare costs are kicking in this year as well. They include: a 0.9 percent increase in the hospital-insurance (Medicare) payroll tax paid by couples earning more than $250,000 a year (raising $21 billion in additional 2013 tax revenue); elimination of corporate deductions for retirees’ prescriptions, raising tax costs to employers ($4.5 billion); a 2.3 percent excise tax on manufacturers and importers of medical devices, which is expected to be passed along in higher costs to consumers ($2 billion); a reduction in the amount that middle-class families facing high medical expenses can deduct from their income taxes if they incur high medical expenses ($2 billion annually); a $2,500 limit on tax-free flexible spending accounts, which employees use to help defray medical expenses ($1.3 billion). Combine the tax hike stemming from health-care reform, the post-holiday increase in the payroll tax, and the tax increases stemming from the fiscal-cliff bill, and the drain on the economy could exceed $2.5 trillion over the next decade. Former House Speaker Nancy Pelosi, D- Calif., described this as “a happy start to a new year.” Good luck and happy paying, all you naive middle class Americans who voted for Obama and continue to believe that he is looking out for your best econonic interests.