April 11, 2012 | Factsheet on Taxes
Taxmageddon: Massive Tax Hikes on the Horizon
Taxmageddon Is Huge
- Unprecedented Tax Hike For 2013: Starting January 1, 2013, Americans will face a $494 billion tax increase, the highest ever in one year. Obamacare’s tax increase over 10 years barely edges ahead of Taxmageddon at $502 billion. The average American household would see its taxes rise by $3,800 in 2013 alone. And this is just for one year. Taxpayers would see even higher tax hikes in succeeding years.
- Expiring Tax Cuts and Obamacare’s New Taxes: Almost 34% of the tax increases from Taxmageddon come from the expiration of the 2001 and 2003 Bush tax cuts. Another 25% comes from the expiration of the payroll tax cut. Most of the remaining increases come from Obamacare, notably from the start of the hospital insurance 3.8% surtax on all forms of income over $250,000.
- Taxmageddon Hits the Middle Class: Taxmageddon falls primarily on middle- and low-income Americans. That’s because 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 they were never supposed to be hit with, and the expiration of the payroll tax cut is a tax hike almost exclusively on middle- and low-income families. That’s just the direct impact. Americans at all income levels will feel the pain of Taxmageddon because it will slow job creation and wage growth.
Businesses Already Preparing for Higher Taxes
- Holding Off on Hiring: Although these taxes don’t start until January 1, 2013, they are already having a negative impact on the economy. This just continues to slow job creation and stop many unemployed Americans from going back to work.
- Uncertainty Harms Everyone: Families, businesses and investors need to know how much more they’ll pay in taxes next year before they make important economic decisions. This means they, and the rest of the economy, are stuck in neutral while they wait to see if Congress and the President will act.
Congress Must Stop This Fiscal Disaster
- Last-Minute Actions Are Dangerous: Congress and President Obama have a penchant for waiting until the 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 again waited until late December to extend the expiring payroll tax holiday. All the while, businesses and families suffered from the uncertainty that Washington created.
- Remove the Threat Now: Congress and President Obama should remove any threat of Taxmageddon from the American people’s future. Businesses, investors, and families need to know now that they will not be hit with a massive tax increase on New Year’s Day 2013.
For more information, please visit http://heritage.org.