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‘Taxmageddon’: $500 Billion Tax Increase Approaching

A wave of tax hikes will hit American taxpayers early next year.

, the path is now clear for 20 new related taxes to go into effect. Over the next 10 years, these new taxes will result in an additional tax burden of $500 billion.

These hikes, combined with several other upcoming tax hikes, are collectively referred to as “Taxmageddon” and will begin to hit American taxpayers in January of 2013.

According to a report in Business Week, the Congressional Budget Office fears the hikes along with planned spending cuts could send the economy back into recession.

“It would also result in 83 percent of U.S. households facing an average $3,701 in tax increases, according to the Tax Policy Center,” Business Week reported.

Whether or not Congress and President Barack Obama will take action to avert what one economic forecaster referred to as a “fiscal cliff,” remains to be seen.

The following list, compiled by the organization, Americans for Tax Reform, is a list of tax hikes that are scheduled to go into effect on Jan. 1, 2013. 

Higher taxes resulting from expiration of 2001 and 2003 tax relief measures:

  • The top personal income tax rate will increase from 35 to 39.6 percent. The lowest rate will rise from 10 to 15 percent. 
  • The “marriage penalty” will return, reducing the standard deduction for married couples.
  • The child tax credit will be halved from $1,000 to $500.
  • The middle class death tax returns and will impose a 55 percent tax on estates valued over $1 million. 

New taxes related to the implementation of Obamacare (Click here for the full list of Obamacare taxes – several have already gone into effect):

  • The Obamacare investment surtax will result in the capital gains rate increasing from 15 to 23.8 percent in 2013 and the dividends tax will rise from 15 to 43.3 percent.
  • The Medicare payroll tax will increase from 2.9 to 3.8 percent for all wages and profits exceeding $200,000 for individuals and $250,000 for married couples.
  • Flexible Spending Accounts (FSAs) will be capped at $2,500. The Americans for Tax Reform notes this cap will be “particularly cruel and onerous” for parents of special needs children who currently take advantage of the unlimited FSA to fund special needs education expenses.
  • A new medical device tax will impose a 2.3 percent excise tax on every medical device valued over $100.
  • The threshold for medical itemized deductions will increase from expenses exceeding 7.5 percent of adjusted gross income to 10 percent of adjusted gross income.

Tax relief provisions related to the Alternative Minimum Tax (AMT) will increase the number of families paying the AMT from 4 to 31 million. Several tax benefits related to businesses, education and IRAs will also be eliminated or limited.

Are you worried about "Taxmageddon"? Do you think President Obama and Congress will act before the election to avoid at least of some of the proposed increase? Let us know in the comments.

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Kristi Reed (Editor) July 09, 2012 at 09:49 PM
To me, these are all bad but some are worse than others. Personally, I do not want to pay $3,701 more a year in taxes. The marriage penalty is ridiculous. I've no doubt we'll get snagged by that stupid AMT and since my husband is in the medical device industry, I am particularly vexed about that excise tax. Of course we were already hit by the "medicine cabinet tax" (see link in article for full list of Obamacare taxes) and higher medical insurance premiums and co-pays due to the uncertainty this "reform" has created in the market.
stacy robinson July 09, 2012 at 10:35 PM
Where is Brian Crawford, Obummer's biggest supporter? He will probably say that this is all just a lie created by the right!
Roy McCreary July 10, 2012 at 12:59 PM
Obama will not stop until he fully wrecks the US economy.
Kristi Reed (Editor) July 10, 2012 at 01:07 PM
It is really hard to believe Congress and the President will let all of these go into effect. There is no way this will not cause serious damage to the economy.
Brian Crawford July 10, 2012 at 05:19 PM
You rang? First of all, any news article that refers to the Affordable Care Act as Obamacare with no preface and links to Grover Norquist's Americans For Tax Reform, is written with a specific bias against the ACA. The ACA is a complex piece of legislation and the taxation issue is one that is easy for opponents to demagogue. In my own personal analysis I try to rely on Congressional reports as much as possible and stay away from sources that may be overtly biased one way or the other. The “Taxmaggedon” referred to in this article primarily consists of two distinct issues: The expiration of the Bush Tax Cuts, and taxes and fees associated with the Affordable Care Act. Let's take 'em one at a time.
Brian Crawford July 10, 2012 at 05:20 PM
The Affordable Care Act (ACA) – The most reliable estimate of the overall impact on revenue from taxes and fees built in to the ACA is $400 billion over 10 years from the Congressional Budget Office (http://www.cbo.gov/sites/default/files/cbofiles/attachments/03-13-Coverage%20Estimates.pdf ). This is further supported by Congress' Joint Committee on Taxation (https://www.jct.gov/publications.html?func=startdown&id=3672 ). According to the JCT document, over half of their total estimate of $409 billion in new revenue comes from taxes that only effect family incomes over $250,000 (see #15). Another $107 billion comes from additional fees and excise taxes on health insurance providers, pharmaceutical companies, and certain medical device manufacturers (#s 8, 9, and 10) while $32 billion comes from excise taxes on “Cadillac” health plans (#1). Few of these taxes has a direct effect on middle class wage earners. The tax impact from the ACA will be negligible on the vast majority of Americans.
Brian Crawford July 10, 2012 at 05:22 PM
The Bush Tax Cuts – These tax cuts expire at years end. The President has stated repeatedly that he strongly supports legislation that would continue the existing tax rates for family incomes under $200,000. which includes all of the middle class. However, he does not believe we can afford to continue these rates for the wealthiest Americans and will veto any legislation that includes them. President Obama once again this week has asked Congress to send him a bill extending the middle class tax cuts. The Republican controlled House continues to hold middle class tax relief hostage because they are insisting on an all or nothing approach. What President Obama is asking for would increase rates only on the top two income brackets back to the Clinton era rates, an increase of 3% and 4.6% respectively. All family income under $217,451 would be taxed at today's rates so a family making $317, 451 would only face a tax increase of $3,000.
BThompson August 01, 2012 at 05:47 PM
A layman middle class independent perspective: U.S. politics and taxes has always been a muddy affair. However, after reviewing the evidence I have determined to be reliable, I have determined that President Obama’s policies would most likely increase my taxes about $400 or about $33 per month. Under policies of those that have been proposed by people like those who control the House of Representatives, my taxes will increase by about $600 or about $50 per month. So, the difference to me between the two proposed sets of policies is about $17 per month. Get real are we really arguing about a difference of $17 per month. This issue is a red heron in my opinion.
Jacqualea Morrison Cooley December 31, 2012 at 07:19 PM
No doubt at all where your vote win? Did you really vote for this joker twice?
Jacqualea Morrison Cooley December 31, 2012 at 07:22 PM
..and who do you suppose will suffer when the people over $250,000 suffer. It trickles down. And who do you thin will pick up the extra taxes on the various health industries. And who do you think will suffer when research companies are taxed? Get you head out of the clouds.
Jacqualea Morrison Cooley December 31, 2012 at 07:24 PM
I sure would like to see your complete analysis because I am sure you did not figure in how the health industry taxes will affect you, nor how the extra taxes on those above you will affect you,
Mr. B December 31, 2012 at 07:26 PM
Don't be so naive Brian. Read the bill. There are tons of tax increases in the bill, many that have nothing to do with healthcare. I listed many of them here on a previous thread.

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