Thursday, July 08, 2010

Everyone's Taxes Will Go Up Thanks to Obama

Remember when Candidate Obama said this:

Then he said this:

So, who will get nailed when the Bush Tax Cuts (during whose time the economy grew and we had 4 to 5% unemployment, by the way) sunset?

EVERYBODY! From Yahoo!Finance:
You may have been led to believe that only individuals in the top two brackets will face higher federal income taxes when the Bush cuts go bye-bye. Not true! Unless Congress takes action and President Obama goes along, rates will go up for everyone -- not just a sliver of the wealthiest Americans. The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%. Just a few months ago, it seemed like a safe bet that Congress would make a fix to keep the existing 10%, 15%, 25% and 28% rate brackets to help out lower and middle-income folks. That bet is now looking iffy.

As one congressman said to Obama: "You lie, Mr. President!"
Obama lies, and the economy dies. But wait, here is some more to digest:
Right now, the maximum federal rate on long-term capital gains and dividends is only 15%. Starting next year, the maximum rate on long-term gains will increase to 20%. The maximum rate on dividends will skyrocket to 39.6% unless action is taken to limit the rate to 20%, as the president has repeatedly promised. Plan on 39.6%, and hope I'm wrong.

Right now, an unbeatable 0% rate applies to long-term gains and dividends collected by folks in lowest two rate brackets of 10% and 15%. Starting next year, those folks will pay 10% on long-term gains and 15% and 28% on dividends (compared with 0% now) unless a change is made. Otherwise, taxes on long-term gains and dividends will go up for everyone.

Return of the Marriage Penalty

Right now, the standard deduction for married joint-filing couples is double the amount for singles. For this, we can thank the Bush tax cuts, which included several provisions to ease the so-called marriage penalty. The penalty can force a married couple to pay more in taxes than when they were single. Starting next year, the joint-filer standard deduction will fall back to about 167% of the amount for singles unless Congress takes action and the president approves. We don't know if that will happen. If not, lots of lower and middle-income couples will face higher tax bills.

Now, the bottom two tax brackets for married joint-filing couples are exactly twice as wide as those for singles. That ratio helps keep the marriage penalty from biting lower- and middle-income couples. Starting next year, the joint-filer tax brackets will contract, causing higher tax bills, unless a change is made.

Read the whole depressing thing.