ABC Taxes, Tips & Tools

Nobody wants new taxes, but the fact of the mat­ter is our gov­ern­ment is spend­ing more than it is tak­ing in. Given that the lend­ing mar­ket is tight, the only place the gov­ern­ment can get their rev­enue is from you, me and Bobby Magee Enter­prises.  One esti­mate is that fed­eral deficit is sup­posed to exceed $600 Bil­lion dol­lars over the next 10 years, which would result in a $15 Tril­lion dol­lar deficit by 2020. Yes that is Tril­lion with a T; 15 fol­lowed by 12 zeros.   To put it in per­spec­tive, by 2020 the pro­jected bud­get deficit will be roughly $50,000  for every man, woman and child cur­rently resid­ing in the United States.  Something’s gotta give.

So what are the possibilities.

• One option is to raise the income and cap­i­tal gains tax rates on upper income folks.  How much? Obama would like to see a top rate of 39.6% for income tax and raise the cap­i­tal gains tax rate from 15% to 20% as well.  In addi­tion, he would like to cap the amount item­ized deduc­tions can reduce a high income filer’s tax lia­bil­ity to 28%.  By the way, high income is some­thing like sin­gles with $196,000 in tax­able income or $231,00o for mar­ried folks.
• A pay­roll tax increase is being kicked about.  Some are dis­cussing rais­ing the Medicare tax rate and also dis­cussing hav­ing those with high incomes pay Medicare tax on unearned income.
• A grad­u­ated sur­tax is being bandied about.  A plan passed by the house in 2009 had the sur­tax start on incomes of Sin­gles $280,000/$350,000 Mar­ried and had a top tax rate of 5.4% on Sin­gles earn­ing more than $800,000/$1,000,000 Marrieds.
• A con­sump­tion tax (VAT) is being dis­cussed. If items like food are exempted then obvi­ously the rate on other things would have to be made higher to off­set the exempted items-the tax rate likely be 3% or more.
• Higher employ­ment taxes on S-corporations is def­i­nitely in the works-both par­ties think that too many peo­ple are skirt­ing employ­ment taxes by tak­ing income as div­i­dends instead of pay.  Right now the rules let them.
• Expect more required report­ing to find rev­enue tar­gets, includ­ing cor­po­ra­tions, land­lords, and fil­ers with over­seas accounts.
• Tighter rules on inde­pen­dent con­trac­tors verses employ­ees is a pos­si­bil­ity.  Why try to pluck the feath­ers of many hiss­ing geese when you pluck the feath­ers of just one?
• Of course the gov­ern­ment could also reduce spend­ing.  Don’t hold your breath, you will turn blue and pass out, just like your mother said.

You can expect at least one vari­a­tion on these themes to be passed even­tu­ally, and which one(s) that do pass depend largely on which party is in charge when the leg­is­la­tion passes. Yes, these are con­tro­ver­sial mea­sures but the gov­ern­ment has to pay the piper sooner or later and when it hap­pens there are bound to be some very unhappy constituents.

What do you think can or should be done about the fed­eral deficit?  Who should pay? Should enti­tle­ments be cut? What is your take on all this tax­a­tion and spend­ing? Remem­ber, even though this topic is a very sen­si­tive sub­ject, we at Art & Busi­ness Con­sult­ing would ask that you try to keep the name call­ing and vit­riol to a min­i­mum in this hope­fully civil discourse.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness, if you need help with this issue or any oth­ers, Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice.  Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.