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Tax Freedom Day Passes, ‘Taxmageddon’ Looms

April 17, 2012, was tax freedom day. Will changes to the tax laws push the 2013 tax freedom day much further back in the year?

This year, the deadline for filing 2011 taxes coincided with “Tax Freedom Day,” the day on which most Americans will have earned enough money to pay their 2012 tax bill. For 2012, taxpayers needed 107 days of income to pay federal, state and local taxes at an estimated combined rate of 29.2 percent.

Americans may have earned enough money to pay this year’s taxes, but what happens in 2013 when several tax cuts expire? Experts say taxpayers may face “Taxmageddon” if Congress does not act to mitigate the impact.

The Tax Foundation warns the $500 billion tax increase set to go into effect on Jan. 1, 2013, could push tax freedom day to the end of April or even later.

The Foundry, part of the Heritage Network, estimates the tax bill for the average American family could increase by as much as $3,800. The higher tax bill would result from a variety of factors including a reduction in the child tax credit, the reinstation of the marriage penalty and a reduction in tax incentives for savings.

According to The Foundry report, “In total, because of the expiration of just these three tax policies, 70 percent of Taxmageddon would fall directly on low-income and middle-income families.”

And if that were not bad enough, as many as 34 million Americans will likely be forced to pay the alternative minimum tax (AMT) and families with more than $250,000 in income will be hit with the health care surtax. Retirees who often depend on investment income in the form of dividend checks will also face higher taxes.

Of the estimated $500 billion in tax hikes, $165 billion will result from the expiration of the Bush tax cuts, Fox News reports. The end of the payroll tax cut will result in an $124 billion tax increase.

“The expiring cuts would hit all income groups but those at low and middle incomes the hardest,” wrote Jim Angle in the Fox News article.

How serious is this problem? According to the Washington Post, economists fear “Taxmageddon” could push the United States economy back into recession due to the fact that $500 billion will go to the government instead of being pumped into the economy.

How big of an impact would a $3,800 tax hike have on your spending? Are you worried about “Taxmageddon”? What do you think presents the bigger problem -- higher tax bills or a larger national debt? Let us know in the comments.

Kristi Reed April 18, 2012 at 06:48 PM
Hike: To rise, especially to rise upward out of place If my tax bill goes up by $3,800, I consider that a tax hike whether it is the result of higher tax rates, the expiration of the Bush tax cuts or other factors. That number is not misleading, it is based on real calculations of the effect the expiration of certain tax cuts will have on the average family's tax bill. As for the tax rates, that is not even the central issue. As The Foundry report explains, the reduction in the child tax credit, the reinstation of the marriage penalty and the expiration of savings incentives will affect those making under $250k a year.
North Georgia Weather April 18, 2012 at 07:54 PM
That's it Brian, twist the facts to suit you... typical. http://www.foxnews.com/opinion/2012/04/18/president-obama-gone-from-hope-and-change-to-blame-and-shame/
Mitch April 18, 2012 at 08:54 PM
Great, the government getting an extra $500 billion instead of the ailing economy! I guess the GSA could afford another lavish party in Vegas if they want. Hopefully Congress will get something done before the end of the year. But I’m worried nothing will get done until after the election which will be cutting it very close. This will simply raise the stakes for an already shaky economy. Until Congress acts, businesses won’t know what their tax rates are going to be, making it hard to hire more workers or plan for the future and leaving both taxpayers and the economy full of uncertainty. Kind of where we have been for some time now and just what we do not need! Sorry Brian but I think we need a new leader who will actually "lead" us out of this economic uncertainty, not down this same path of uncertainty.
Brian Crawford April 19, 2012 at 02:12 PM
I've looked at The Foundry's math and it doesn't add up. This isn't surprising since the Foundry is part of The Heritage Foundation who's sole purpose is to spread anti-government, anti-tax propaganda. I don't think there's any doubt we're all going to have to pay higher taxes once the recovery is over to pay for the transgressions of the Bush years; two unfunded wars, Medicare D and the financial crisis. The Obama administration is trying to keep as much of that burden off the backs of the middle class as possible. Obama has proposed keeping the elements of the Bush tax cut that benefit middle incomes (child tax credit, easing of the marriage penalty, and savings incentives) while letting those that benefit higher incomes expire. Congressional Republicans will no doubt attempt to hold the middle class hostage, as they have done repeatedly, in order to take care of their ultra wealthy benefactors.
Brian Crawford April 19, 2012 at 05:28 PM
Twist how? The Foundry is the one twisting facts.

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