News From Terre Haute, Indiana

Archive

January 2, 2013

Despite deal, taxes to rise for most Americans

WASHINGTON — While the tax package that Congress passed New Year’s Day will protect 99 percent of Americans from an income tax increase, most of them will still end up paying more federal taxes in 2013.

That’s because the legislation did nothing to prevent a temporary reduction in the Social Security payroll tax from expiring. In 2012, that 2-percentage-point cut in the payroll tax was worth about $1,000 to a worker making $50,000 a year.

The Tax Policy Center, a nonpartisan Washington research group, estimates that 77 percent of American households will face higher federal taxes in 2013 under the agreement negotiated between President Barack Obama and Senate Republicans. High-income families will feel the biggest tax increases, but many middle- and low-income families will pay higher taxes too.

Households making between $40,000 and $50,000 will face an average tax increase of $579 in 2013, according to the Tax Policy Center’s analysis. Households making between $50,000 and $75,000 will face an average tax increase of $822.

“For most people, it’s just the payroll tax,” said Roberton Williams, a senior fellow at the Tax Policy Center.

The tax increases could be a lot higher. A huge package of tax cuts first enacted under President George W. Bush was scheduled to expire Tuesday as part of the “fiscal cliff.” The Bush-era tax cuts lowered taxes for families at every income level, reduced investment taxes and the estate tax, and enhanced a number of tax credits, including a $1,000-per-child credit.

The package passed Tuesday by the Senate and House extends most the Bush-era tax cuts for individuals making less than $400,000 and married couples making less than $450,000.

Obama said the deal “protects 98 percent of Americans and 97 percent of small business owners from a middle-class tax hike. While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country.”

The income threshold covers more than 99 percent of all households, exceeding Obama’s claim, according to the Tax Policy Center. However, the increase in payroll taxes will hit nearly every wage earner.

Social Security is financed by a 12.4 percent tax on wages up to $113,700, with employers paying half and workers paying the other half. Obama and Congress reduced the share paid by workers from 6.2 percent to 4.2 percent for 2011 and 2012, saving a typical family about $1,000 a year.

Obama pushed hard to enact the payroll tax cut for 2011 and to extend it through 2012. But it was never fully embraced by either party, and this time around, there was general agreement to let it expire.

The new tax package would increase the income tax rate from 35 percent to 39.6 percent on income above $400,000 for individuals and $450,000 for married couples. Investment taxes would increase for people who fall in the new top tax bracket.

High-income families will also pay higher taxes this year as part of Obama’s 2010 health care law. As part of that law, a new 3.8 percent tax is being imposed on investment income for individuals making more than $200,000 a year and couples making more than $250,000.

Together, the new tax package and Obama’s health care law will produce significant tax increases for many high-income families.

For 2013, households making between $500,000 and $1 million would get an average tax increase of $14,812, according to the Tax Policy Center analysis. Households making more than $1 million would get an average tax increase of $170,341.

“If you’re rich, you’re almost certain to get a big tax increase,” Williams said.

1
Text Only | Photo Reprints
Latest News
TribStar.com Poll
AP Video
Passengers Abuzz After Plane Hits Swarm of Bees Disbanding Muslim Surveillance Draws Praise Hundreds Missing After South Korean Ferry Sinks Boston Bomb Scare Defendant Appears in Court Pistorius Trial: Adjourned Until May 5 Raw: Urinator Causes Portland to Flush Reservoir Diaz Gets Physical for New Comedy Raw: Ferry Sinks Off South Korean Coast Raw: Pro-Russian Militants Killed on Base Captain of Sunken South Korean Ferry Apologizes Miley Cyrus Still in Hospital, Cancels 2nd Show New York Auto Show Highlights Latest in Car Tech Today in History for April 17th Raw: Three Rare White Tiger Cubs Debut at Zoo Pope's Relic on Wheels Departs to Rome Raw: Fatal Ferry Boat Accident Hoax Bomb Raises Anxiety in Boston Raw: Blast at Tennessee Ammunition Plant Kills 1 Freeze Leaves Florida Panhandle With Dead Trees Egypt Clamps Down on Mosques to Control Message
NDN Video
Grizzly Bears Get Snowy Birthday Party Florida State Ends Top Of the 5th With Bizarre Play vs Jacksonville | ACC Must See Moment Kate Upton Loves Her Body, Every Part Of It Weatherman draws forecast when another technical glitch strikes WGN Elizabeth Olsen's Sexy Shoot Bay Area Teen Gets Prom Date With Help From 'Breaking Bad' Star Boston Bomb Scare Defendant Appears in Court Behind The Tanlines Jersey Strong Part 1 WATCH: Women Fight To Marry Prince Harry! Jenny McCarthy Engaged to "New Kid" Kate and Will Land in Oz O’Reilly Launches Preemptive Strike Against CBS Pixar Unveils Easter Eggs From its Biggest Movies Baby Sloths Squeak for Their Cuddle Partners in Adorable Video Miley Cyrus Hospitalized After Severe Reaction To Medicine Raw: Ferry Sinks Off South Korean Coast Toddler climbs into vending machine 8-year-old Boy Gets His Wish: Fly Like Iron Man Much-Anticipated 'Gone Girl' Trailer Finally Debuts! (VIDEO) Dog and Toddler Wear Matching Outfits in Adorable Photo Series
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
  • -

     

    March 12, 2010

activity