What Will Happen to Your Taxes in 2013
At the end of this year there are two major tax-cuts slated to lapse. First there is the Bush Tax Cut which was enacted as a “temporary” tax break that has been in place for close to a decade. Second, is the pay-roll holiday tax cut on social security withholdings which has been in place as a “temporary” tax break since 2010. Most likely congress will at least extend the Bush Tax cut for one more year allowing the newly formed congress which will be sworn in in late January. According to Jared Bernstein of the Center for Budget and Policy Priorities, “I don’t see any politics that could facilitate a deal in the lame-duck session.” That said there would be a few weeks where the tax hike would take place before the new congress could enact the extension, causing a crazy process to manipulate tax withholdings for the higher rate and then adjust them when the rates are lowered later on. The process could cause markets to dive and leave the people anxiously awaiting Congress to clean up the mess they made for themselves. Jared goes on to say “It would be pretty freakin’ nuts,” and “That’s no way to run an economy.” Most experts expect Congress to allow the payroll tax holiday to lapse raising the social security withholdings rate, causing someone making $50,000 annually to take home $80 less per month.
No matter what there are definitely tax hikes coming in the future for all Americans as the national debt is too large and the vital programs for the seniors and the poor will not be able to continue without additional funding. In 2013 wealthier taxpayers could see a higher tax rate within the deal, as that is a basic condition the Democrats have set for a compromise of any type. According to a report by Third Way, a centrist think tank, “It is mathematically impossible to preserve our current path for Medicare, Medicaid, and Social Security without a blistering tax increase on the working age middle class at some point in the near future.” The thing is the wealthy alone cannot possibly afford to pick up the tab for a shrunken government, thus taxes will increase in other areas. The political tax battle at the end of 2012 will only be the opening act in a long drawn out war over how to rectify the government’s fiscal dilemma.
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To read the entire article by Rick Newman from US News & World Report click here.