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  • Morning Bell: How Taxmageddon Will Impact You

    “I’ve said that this is a make-or-break moment for the middle class, and I believe it,” President Obama told an Ohio crowd yesterday. Indeed it is—because in a sluggish economy, American taxpayers are about to be clobbered by the largest tax increase in history.

    Starting January 1, 2013, Americans will face a $494 billion tax increase, the highest ever in one year. According to The Washington Post, congressional aides started calling it “Taxmageddon“—a chilling reference fit for an apocalyptic nightmare. Federal Reserve Chairman Ben Bernanke has warned that it will be a “massive fiscal cliff” for the economy.

    See the full infographic with six taxpayer profiles on our new Taxmageddon page

    How will this affect you? Heritage has a new Taxmageddon page that shows the impact of these tax hikes on individuals. It includes an interactive map where you can click on your state to see what the average tax increase will be, based on the average income of taxpayers in your state.

    Heritage research shows that families will see an average tax increase of $4,138. Baby boomers’ average increase will be $4,223, and low-income taxpayers can expect a $1,207 increase. Millennials will be hit with an average hike of $1,099, and retirees $857. Check out the infographic to see where you fall.

    Taxmageddon falls primarily on middle- and low-income Americans. That’s because, contrary to the President’s rhetoric about “the wealthiest Americans,” 60 percent of the Bush tax cuts went to middle- and low-income taxpayers. The expiration of the patch on the Alternative Minimum Tax (AMT) will cause these taxpayers to pay a tax that was never supposed to hit them, and the expiration of the payroll tax cut is a tax hike almost exclusively on middle- and low-income families.

    This is only the direct impact on individual taxpayers. Americans at all income levels will feel the pain of Taxmageddon, because it will slow job creation and wage growth. At 8.2 percent unemployment, it’s the last thing the economy needs.

    Where are these tax increases coming from? Under current law, tax policies in seven different categories will expire, and just five of the 18 new tax hikes from Obamacare will begin.

    About a third of Taxmageddon’s increase comes from the expiration of the 2001 and 2003 Bush tax cuts. These cuts are best known for reducing marginal income tax rates, but they also reduced the marriage penalty, increased the Child Tax Credit and the adoption credit, and increased tax breaks for education costs and dependent care costs.

    What is the President doing to prevent this? Congress and President Obama have developed a penchant for waiting until the very last minute to act on pressing tax legislation. In 2010, they waited until late December to extend the expiring Bush tax cuts for two years. At the end of 2011, they waited again until late December to extend the expiring payroll tax holiday. This is a bad habit.

    The threat of Taxmageddon is clouding jobs and family finances now. Businesses, families, and investors are uncertain about the future. They need to know as soon as possible that this massive tax increase will not hit them on New Year’s Day 2013.

    But yesterday, Obama told the crowd he was their economic savior: “I have approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his.” He also warned that Republicans want to raise taxes on the middle class, adding, “This is not spin. This is not my opinion. These are facts.”

    The fact is that during his first three years in office, the Obama Administration unleashed 106 new major regulations that increased regulatory burdens by more than $46 billion annually, five times the amount imposed by the George W. Bush Administration during its first three years. Hundreds more costly new regulations are in the pipeline, many of which stem from the Dodd–Frank financial regulation and Obamacare. Conveniently, of course, many of Obamacare’s main provisions—including tax increases—don’t kick in until 2014.

    And as for the threat of raising taxes on the middle class, the President needs look no further than the laws that are already in place. If he really wants to prevent a cataclysmic tax increase on working Americans, preventing Taxmageddon is the answer. These are facts.

    Quick Hits

    • The EPA is set to release a new air quality standard today—the Administration “had sought to delay the politically fraught rule until after the election, but was forced to act by a court order,” according to the AP.
    • In advance of Sunday’s election in Greece, bankers, governments, and investors are starting to prepare for a worst-case scenario that could involve theU.S., the AP reports.
    • Now that “don’t ask, don’t tell” has been repealed, the Pentagon is planning the first gay pride event for the military.
    • Egypt is in chaos approaching Saturday’s presidential runoff election. A court ruling yesterday dissolved its parliament, and the military has authorization to arrest civilians in the event of public protests.
    • Online chat today at noon Eastern: Reagan’s Impact on Foreign Policy. Heritage’s Marion Smith will take your questions about the impact of Reagan’s “Tear down this wall” speech and its implications for foreign policy today.
    Posted in Ongoing Priorities [slideshow_deploy]

    23 Responses to Morning Bell: How Taxmageddon Will Impact You

    1. Dr. Henry Sinopoli says:

      The real concern should be, "How do life-time politicians impact the public. For years we have Republicans blaming Democrats, and then the other way is reinforced. Historically, the intellects, like Heritage continue to lead us to believe if we have a strict adherence to the conservative or liberal point-of-view all will be well. The truth, the country is run by special interests, supported by radio talk shows and reinforced by 'pseudo' intellectual writers from organizations like Heritage who keep the debate alive, keep supporting lifers and believe things will get better. Perhaps Ed & Boehner need another round of golf with Barry…

      • Clearhead says:

        Hey Hank — We would appreciate it if you would try that again. From your post we gather that Heritage is one of the "intellects" (whatever that is) and is an "organization of 'pseudo' intellectual writers". Beyond that, your meaning (e.g. your last two sentences) is rather obscure.

    2. Mike says:

      Hi Amy, thanks for posting this, but since you are evidently "pseudo" intellectual as this Dr. put it can't believe any of the facts you just put out there.

      King Mike

    3. ThomNJ says:

      Amy, the Taxmageddon map is not coming up on the website.

    4. Ann says:

      Thank you, once again, for getting the "facts" out to the people. The truth definitely won't come from this President or the majority of media outlets.

    5. MDB749 says:

      And, why can't the Republican party articulate these facts? HUH???

    6. Charles Nystrom says:

      The matter of how much to tax and who to tax can go on ad-infinitum without solving the essential need to grow productive, wealth creating, private sector jobs. When "real" unemployment is under 6%, many of the current fiscal problems will at least be far more manageable. Where are the specific proposals for doing this?

      • Clearhead says:

        For those wearing polarized glasses which restrict their view to only one side of the aisle, many of the 'specific proposals' you mention originate, and have originated from within those myopics' blind side. Those 'proposals' get as far as the Senate, and are parked in the long term garage by Hapless Harry. We should be aware by now, Chuck, that the 'current fiscal problems' are simply the logjam of Harry-boy's puppeteer.

    7. Carol, AZ says:

      America's "new age" Manchurian candidate has been fabricated as a leader in an expensive suit.
      Heritage, that chronicles our living history, refuses to expose Barry, a foreign student, and his handlers, as the {cause and effect} and ultimate destruction of America.
      All press that hints about the corruption is never heard from again.
      Barry and his home boys are rewriting American history for decades to come, and most of America is still star struck, waiting for some kind of miracle to happen as corruption leaks in every directions.
      If you still value "free press", the new synopsis, should read:
      "The Certain Death Of A Democracy."

    8. Jim Colorado says:

      Why don't the pundits and so called experts get it right. Payroll tax is for Social Security and Medicare.
      It is fiscal irresponsible to touch this when they say we are on the brink of running out of money for
      both of these insurances. Social Security should have senior priority here. This is like robbing from peter
      to pay paul. Should be a cardinal sin just like taking money out of your IRA before turining 591/2.
      This is only a matter of commen sense which obviously doesn't exist in the Beltway. Get on board
      Heritage or I will defund you!

    9. Chris says:

      Good article, but you only focused on one aspect of Taxmageddon (expiring Bush tax cuts). There's more to it.

      1. Taxmageddon refers to 2 or more things which will happen simultaneously, but you only mentioned expiring Bush tax cuts. Also, triggered federal spending cuts (incl. large military cuts), and another debt ceiling stalemate. No matter the result of the Nov. elections, taxmageddon occurs at year end, before any change in leadership.

      2. If Romney wins or the republicans take leadership, I doubt the Bush tax cuts will be allowed to expire (due to clear mandate). If they are, I think we can expect that they will be quickly re-established by the new leadership. The other aspects of Taxmageddon, which you ignored, might be more difficult to rein in.

      3. If the the election does not result in significant leadership changes, we will have the same situation (re:Bush tax cuts) as last year. The difference is that last year, democrats wanted to retain the Bush tax cuts for people under $250K. This time, they want to retain the cuts for people under $1M. I assume you left this out because any such "compromise" is unfathomable in the current political climate, yet it is relevant given your article's focus that "Taxmageddon will fall primarily on middle- and low-income Americans." This is a talking point the democrats will make, and which I see as a potential difficulty to republicans in our upcoming debates.

    10. Just when I was convinced everything is bad I find out it is worse!

    11. Bobbie says:

      wipe it all out. his vision of America's demise. All his anti American rules and mandates that are effecting us now and will effect generations long after. His tax increasing for no reason but the growth of unconstitutional government and benefits for his chosen. Singling out the prosperous for reasons to hate and resent, then punish by tax, eliminates all present and future opportunity to gain prosperity. None of his work is American approved. All he has done is invalid. He's a head fake leading fakes, who's trying to "change" otherwise good people into fakes! He challenges truth with absolute defiance to accept. He's way too costly and unnecessarily provoking…

    12. steve h says:

      Let all the tax cuts expire. Even the low and middle income tax cuts. When the Republicans passed them in 2001 and 2003, they were meant to be temporary. Go back and read the Congressional Record, they all said it would temporary. Now they want to make them permanent? Despite the huge holes they've made in our budget? Crazy.

      • Bobbie says:

        you must be a government leech, Mr. h?? Cuts is money already earned by the earner, restricting government the ability to TAKE FROM the earner FOR government BENEFIT which is all this tax increase is about! More control, waste work, non productivity, dangerous! Nothing else! The less control government has over people is the strength of freedom liberties, independence. Free people. Today's America, land of the world, shouldn't want or need such control in and over their lives. Why is your faith in government? Why do you see so little in people, in America, like Obama's government does?

        What huge holes in "our" budget we have no control over that would've been expected avoidance or corrections to had we competent people who respect their duty in government, are you talking about? Be specific. What part of Obama's inheritance did he not take part in? He was in the senate with the opportunity to make responsible decisions to avoid this huge avoidable inheritable crisis. Don't see why people are forced to pay from their money earned for corrupt resources over ones own expense with more their money earned (less government costs) to their personal freedom and self control…livelihood?

    13. Conservative Dave says:

      With Obungle as the budget developer and Scary Reed as our unleader in the Senate we haven't had a national budget in three years. If that were my family we would be headed in chaos over a financial cliff. Wait- Our nation is going over that cliff. We need solid, honest and practical leadership that has the guts to balance the budget, not a national credit card spending crowd of bipartisan blowhards. Wake up and in November elect fiscal conservatives to the White House and Congress.

    14. Curt Krehbiel says:

      Does this mean that the 50% that pay no income tax now will have to pay some? Surely these Obama voters will be spared. The "Taxmageddon" will only accelerate the increase in layoffs as the economy winds down as it will with the increased tax burden.

    15. Blair Franconia, NH says:

      Don't me. I don't pay taxes.

    16. Brent Battles says:

      I'm fed up with particularly Republicans and especially Conservatives couching opposition to current tax increase proposals as not being appropriate "while experiencing a sluggish economy! " (You expect this from big government advocates.) EVERY tax must pass strict muster … always.

      Get back to tax basics in the same way as the proposed citing of Constitutional authority for legislation. Define the purpose of a tax. Define it very precisely. Determine what level of government, if any, is closest to the need and place the tax there. Define a measure of success at which point funding will diminish or cease. Create a budget to cover the need. Track expenditures and results. "No tickee (results), no laundry (continued funding)." (No apologies to our great Chinese friends, who thankfully still have a sense of humor.)

      By the way, "full employment" has historically (for many decades) meant 4% which combined those who could not/would not find work and those who were temporarily and purposely between jobs. We're being lulled to sleep with 8% numbers and miscalculation of that number itself to hide reality.

    17. Blair Franconia, NH says:

      Not me. I don't pay taxes.

    18. libertarian jerry says:

      Don't blame the politicians blame the American people. Half the American people don't even pay any Income Taxes. Added to this fact is that almost 2/3 of the American population are net tax consumers. Either government employees,retired government employees,Social security recipients,Welfare recipients,Medicare/Medicaid recipients,military,retired military,people on food stamps,people on unemployment compensation,etc.etc. 90% of the people on the Government gravy train are involved in programs and functions of government that didn't exist 80 years ago and are nowhere mentioned in the Constitution. The majority of the American people are trying to live off a shrinking minority. Yet when candidates like Ron Paul comes along they are ignored and all the attention goes to buffoons like Mitt Romney who blames another buffoon,Barack Obama. Over the last 35 years patriotic Americans have been going to jail or losing everything fighting the IRS and the Federal "Justice" system over the Income tax's Legality. Has any so called "Conservatives" reached out to help these people? Patriotic Americans have been raising the distress flag for decades about the collapse of the American Republic and its replacement with a mobocracy Democracy. Well the Rubicon has been crossed. The Republic is dead. A majority of Americans have voted away there birthright of Liberty and replaced that liberty with the security of a Social Security card. So don't complain when taxes go up. There is no such thing as a free lunch. Somebody has to pay.Its you.You've been out voted.

      • Bobbie says:

        all the people unfairly exempted from taxes is due to many insiders in government. They wouldn't be tax exempt without government allowing it. Discriminatingly obviously.

    19. BOB FEDAK says:

      How will taxmageddon effect people with jut social security income?

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