- The Foundry: Conservative Policy News from The Heritage Foundation - http://blog.heritage.org -
New Calculator Shows How Much More Taxes Will You Pay Next Year
Posted By Curtis Dubay On July 27, 2010 @ 3:00 pm In Economics | Comments Disabled
We are on the precipice of the largest tax increase in United States history . On January 1, 2011, the 2001/2003 tax relief will expire. All Americans who earn income will see their taxes go up as a result (even those who work but don’t pay any federal income taxes) unless Congress acts soon to prevent this massive tax hike.
The constant refrain from those who oppose the tax relief is that they benefited only the rich. If the tax cuts expire as scheduled, this myth will be proven untrue once and for all. But taxpayers don’t have to wait until next year to see how much bigger a bite Uncle Sam will take. The Tax Foundation recently created a tax calculator that will show them how much more they will pay in taxes next year .
The Tax Foundation’s calculator calculates taxpayers’ liability under three different scenarios: (1) Congress extends all the 2001/2003 tax cuts; (2) Congress allows all the tax cuts to expire; and (3) some of the tax cuts expire and some are extended (President Obama’s tax plan).
The calculator asks users for a few selected pieces of information and then calculates their tax bills under each scenario. For instance, a married couple with two children under 17 earning $45,000 a year with no other income and $2,500 in state and local tax deductions and $2,500 in real estate taxes would see the following results:
Note: Obama’s proposal includes the $800 Make Work Pay credit that was put in place as part of the stimulus package. This accounts for the $800 difference between “Income Tax If Bush Tax Cuts Are Extended” and “Income Tax under Obama’s Tax Proposals.” The Make Work Pay credit expires after 2011 under the President’s budget, so the categories return identical results for subsequent years.
This hypothetical family will pay $3,002 more in taxes next year if Congress allows all the tax relief to lapse. That is more than 3 percent of their income that they won’t get to spend as they wish but will instead be handed over to Congress to spend as it wishes.
The calculator is a great tool for taxpayers to figure out how much of their hard-earned income they will lose if Congress continues to refuse to extend the tax cuts. It is also a powerful tool for dispelling the myth that the tax cuts were only for the rich—as the significantly higher tax bill the middle-income family above attests.
Time is running for short for Congress to extend the tax cuts. The heavy toll higher taxes would impose on the economy and every American family’s budget demands that Congress make extending the tax relief one of its top priorities in the time it has left. Because extending the tax cuts is so important, Congress should not let doing so slip until a “lame duck” session where the probability that it allows the tax relief to lapse increases exponentially.
Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2010/07/27/new-calculator-shows-how-much-more-taxes-will-you-pay-next-year/
URLs in this post:
 Image: http://www.foundry.org/wp-content/uploads/TaxCalculator.jpg
 largest tax increase in United States history: http://atr.org/six-months-untilbr-largest-tax-hikes-a5171
 tax calculator that will show them how much more they will pay in taxes next year: http://www.mytaxburden.org/
 Image: http://www.foundry.org/wp-content/uploads/tax-chart.jpg
Copyright © 2011 The Heritage Foundation. All rights reserved.