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Party’s over for tax cuts

By Judy Martel · Bankrate.com
Sunday, June 5, 2011
Posted: 6 pm ET

Get ready for higher taxes, especially if you're wealthy. It's increasingly looking like the tax party is winding down, and you can blame the national deficit. Projected to reach a two-year cumulative total of $2.5 trillion in 2012, according to Bloomberg, the Obama Administration is looking for ways to raise revenue and pay the piper.

Rates on capital gains, dividends and income are already scheduled to increase in 2013, after the extension on the Bush-era tax cuts runs out on the last day of 2012. Unless Congress acts before then, the capital gains and dividends rate will increase from 15 percent to 20 percent. In addition, President Obama is calling for the top tax bracket for those earning $250,000 or more to increase from 35 percent to 39.5 percent. Those in the top income bracket will also be charged an extra tax on unearned income to pay for health care reform.

The super-rich are no doubt thinking about moving wealth now to circumvent some of the looming tax increases; in some cases their heirs may benefit sooner rather than later. Until the end of 2012, individuals are allowed to gift up to $5 million without paying tax, but when that benefit expires, the gift tax exclusion will revert to $1 million. So there could be some shifting of assets to children and grandchildren.

Some investment experts worry that if the rich start shifting money to future generations instead of spending and investing, it will affect the economy. Investments are the main asset for the wealthy, while for the middle class, it's a home. And consumer spending makes up three-fourths of the economy.

Although polls show the middle class generally favors taxing the wealthy, it's not just the rich who will be paying. There's talk in the Administration about reducing tax breaks for home mortgage interest, charitable contributions, municipal bonds and retirement contributions, though many politicians view those tax breaks as sacred cows.

Time will tell, but the fact remains that the money to pay down the deficit will likely have to come from tax revenue.

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3 Comments
alanderman
June 07, 2011 at 3:30 am

Corporate America is currently sitting on a 2 TRILLION dollar hoarde of cash, and refuses to create the minimum monthly new jobs increase (about 200,000 monthly) needed to lift the U.S. from its economic abyss and austerity mania. The Wall Street rhetoric and bond market obsession with the national debt and the $14.3 Trillion dollar spending limit is largely another distraction from correcting the unfair,secretive offshore banking situation and system wherein TRillions of untaxed dollars from corporations and super-wealthy avoid taxation annually (see TREASURE ISLANDS, by Nick Shaxson).No more tax concessions for these unpatriotic and greedy tax dodgers while austerity cuts for elderly, disabled, and students are ravaging our plutocratic country!

Dean
June 06, 2011 at 3:32 pm

How much deficit spending has gone on since the last election! It is insane! Unemployment is over 9 percent and heading up again!! The failed policy of the last two years is a disaster. There is no choice but to cut spending!! Massive spending cuts are what is needed. There will no doubt be tax increases I am sure, just the way it is. After those tax increases you will see unemployment rise again!! The government does not stimulate a free economy. That is the problem, for what ever reason some people just don't get that. I wonder who provides all the jobs in this country. I wonder who already pays 70 PERCENT of all the taxes paid. All this spending was sold under the current administration as HOPE and CHANGE. What a joke and what pain it is causing all of us, and will cause this country for many years to come. Spend, Spend, Spend that is the only policy we have in this country which is ridiculous. Taxes the rich will not get us out of this mess, not matter how good it may sound to some folks!! The ONLY thing we need is a balance budget amendment!!!!!!! That would stop all the spending and get us back on track.

Marcus
June 05, 2011 at 11:05 pm

Tax cuts failed during the Bush administration to create the nearly 200,000 net new jobs per month that his CEA said it would.
Worse, it increased the national debt by trillions. The Bush administration essentially created no new net jobs during its tenure. The real estate bubble they relied upon - with relazxation of loan standards in 2003 and 2004 with laws passed by the GOP Congress - to gin up the employment numbers burst and cratered the economy.
The price we are paying is a third world infrastructure, cuts in critical services to the elderly, massive shift in wealth from the middle class to the wealthy, banks and corporations SITTING on scads of cash, unwilling to reinvest their OWN country. And please note that many corporations pay a pittance in taxes. Many pay none. Their contribution to this country, to the men and women who die and bleed for them overseas a paltry 6% as opposed to about a third in the Ike Administration. Traitors.

And let's go back to the Reagan era where 3 trillion in deficit spending was the only reason for economic stimulus, not the tax cuts for millionaires.

Tax cuts were a scam sold to a gullible public. From Prop 13 in California in 78 that has destroyed out educational system and made it so that many California middle class students are priced out while their wealthier brethren find a nice subsidized university education. And the GOP wants more of the same because after all, they are about power and the power of wealth, they no longer care about America.