Federal Tax Increase

Tax increases are for the most part inevitable and impact just about every facet of our life. While some taxes only affect certain people others affect everyone.

April 1st saw a cigarette tax increase of .62 cents, courtesy of President Obama, which has lower wage earners with a smoking habit up in arms. It also slows down individual states that had planned to increase their own cigarette taxes.

According to the Wall Street Journal, "... [the]Obama administration has proposed the following type of federal income tax increase to fund one of its health care proposals: A limit on the value of deductions to higher income tax bracket taxpayers based on a maximum tax rate of 28%. For example, if you are in a tax bracket higher than 28%, your deduction would be limited to the amount of the deduction that you would have been entitled to had you been in the 28% tax bracket. Usually the value of the deduction is the amount of the deductible items times your tax bracket. So if you paid $1,000 in deductible interest and you were in the 35% tax bracket, your deduction would reduce your taxable income by $350. Under the Obama proposal, the value of your deduction would be limited to $280".

While many corporations are working under the theory that if they cut enough benefits, the necessity of a massive tax increase would be prevented but seriously, the percentage of the population that benefits from Social Security and Medicare is at an all time high as the baby boomer generation ages so how likely is it that such a measure could work? The other obvious point is that the elderly vote is the highest percentage of any age group so their political clout is substantial.

The reality, which absolutely no one in either party wishes to face, is that benefits are never going to be cut enough to prevent the necessity of a massive tax increase in the not-too-distant future. Those who think otherwise are either grossly ignorant of the fiscal facts.

As 2009 rolls to an end, the Federal Taxes to watch for are California Marijuana tax, the Federal Cap and Trade tax, Federal Alcohol tax and of course, the ever popular Greenhouse gases tax.

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