In a new holiday tradition, Congress let 55 tax breaks expire on January 1 - more than the 36 breaks that expired in 2012, and a few less than the 58 breaks that expired in 2011. But there are six expired tax breaks in particular that will have individuals and small businesses scrambling for cover.
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55 Tax Breaks Just Expired
Will Congress renew them in time?
Are You Ready for "Taxmageddon"?
A slow moving train wreck known as "Taxmageddon" is creeping toward U.S. taxpayers.
You see, if Congress doesn't act by year's end, numerous tax breaks will expire -- and hit every American taxpayer squarely in the wallet.
It's a fiscal tsunami that will strike as early as December. The damage will be so widespread it could derail the entire U.S. economy.
Nobody in Washington, however, is doing anything about it.
"You just don't get the sense that there's even a secret plan yet," Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, told The Washington Post. "It's scary."
If you're not worried yet, you should be.
Here's why...
Also set to expire that day will be a temporary payroll-tax holiday on social security.
The tax changes won't just slam a few income brackets; they'll reach all taxpayers.
Every one of the existing income tax brackets will be ratcheted up, starting with the lowest 10% bracket, which will be hiked to 15%. The 25% bracket will jump to 28%; the 28% bracket will go to 31%; the 33% bracket will be replaced by a 36% bracket and the 35% bracket will soar to 39.6%.
Stock market investors will also be punished.
Right now, the maximum tax rate on long-term capital gains and dividends is only 15%. Starting next year, the maximum rate on long-term gains is scheduled to increase to 20%.
But get this -- the maximum rate on dividends will skyrocket to a whopping 39.6%.
That's not all.
You see, if Congress doesn't act by year's end, numerous tax breaks will expire -- and hit every American taxpayer squarely in the wallet.
It's a fiscal tsunami that will strike as early as December. The damage will be so widespread it could derail the entire U.S. economy.
Nobody in Washington, however, is doing anything about it.
"You just don't get the sense that there's even a secret plan yet," Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, told The Washington Post. "It's scary."
If you're not worried yet, you should be.
Here's why...
"Taxmageddon" Means Higher Taxes for All
The Bush-era tax cuts will end on Jan. 1, 2013, unless Congress intervenes.Also set to expire that day will be a temporary payroll-tax holiday on social security.
The tax changes won't just slam a few income brackets; they'll reach all taxpayers.
Every one of the existing income tax brackets will be ratcheted up, starting with the lowest 10% bracket, which will be hiked to 15%. The 25% bracket will jump to 28%; the 28% bracket will go to 31%; the 33% bracket will be replaced by a 36% bracket and the 35% bracket will soar to 39.6%.
Stock market investors will also be punished.
Right now, the maximum tax rate on long-term capital gains and dividends is only 15%. Starting next year, the maximum rate on long-term gains is scheduled to increase to 20%.
But get this -- the maximum rate on dividends will skyrocket to a whopping 39.6%.
That's not all.
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President Obama’s Corporate Tax Rate Plan Won’t Get Anywhere in 2012
The Treasury Department today unveiled U.S. President Barack Obama's corporate tax rate plan, in an effort to get ahead of Republican candidates who will be promoting their plans this week.
President Obama wants to lower the corporate tax rate from 35% to 28%. He wants an even lower rate for U.S. manufacturers to encourage corporations to produce at home.
Although the move could benefit U.S. corporations down the road, right now it's much more a political tactic than a realistic policy change.
"This is a very cynical move," Greg Valliere, chief political strategist at the Potomac Research Group, told Bloomberg Television. "It comes one day before a Mitt Romney speech in Detroit in which Romney will outline his tax proposal. So in effect the White House is saying, "Hey, we're in favor of tax reform,' even though they know there's virtually no chance of getting anything done this year."
This year will likely mark the start of serious corporate tax rate discussions, but with an election in the fall and bipartisanship in Washington, don't expect a tax rate change in 2012.
"This is such a bitterly gridlocked and divided Congress that something this enormous I think has no chance of making it before 2013," said Valliere.
President Obama wants to lower the corporate tax rate from 35% to 28%. He wants an even lower rate for U.S. manufacturers to encourage corporations to produce at home.
Although the move could benefit U.S. corporations down the road, right now it's much more a political tactic than a realistic policy change.
"This is a very cynical move," Greg Valliere, chief political strategist at the Potomac Research Group, told Bloomberg Television. "It comes one day before a Mitt Romney speech in Detroit in which Romney will outline his tax proposal. So in effect the White House is saying, "Hey, we're in favor of tax reform,' even though they know there's virtually no chance of getting anything done this year."
This year will likely mark the start of serious corporate tax rate discussions, but with an election in the fall and bipartisanship in Washington, don't expect a tax rate change in 2012.
"This is such a bitterly gridlocked and divided Congress that something this enormous I think has no chance of making it before 2013," said Valliere.
To continue reading, please click here...
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