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July 3, 2012

Taxpayers Possess Power to Stop Coming Taxmegeddon

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If your paying Florida taxes, you're in for a big surprise right after your New Year's EveParty. The largest tax increase in U.S. history could hit you and millions of other taxpayers on Jan. 1, 2013. About $494 billion in additional taxes will be imposed then unless Congress and the president act to stop them.

In Florida, the average taxpayer could be paying $3,669 more in taxes. Altogether, Floridians will be sending Uncle Sam $34 billion in more taxes in 2013 than they did in 2012.

If you're asking yourself how this happened and who's to blame, look no further than a host of unresolved tax problems that Congress and President Obama have been unwilling to solve.

Our nation's policymakers have kicked the tax-policy can down the road, and expiring provisions of the 2001 and 2003 tax acts now mean a $165 billion tax increase on Jan. 1.

Other January surprises are an expiring payroll tax cut: $125 billion in new taxes; expiring tax relief from the Alternative Minimum Tax: $119 billion in new taxes; another $62 billion in new taxes from other expiring tax cuts; and, to top it all off, $23 billion in brand new taxes from Obamacare.

And New Year's Day used to be such a happy occasion!

Not so anymore, particularly if you live in Boca Raton or Ft. Lauderdale. Taxpayers in those towns and throughout the 22nd Congressional District that contains those cities will be paying an additional $7,087 in taxes in 2013. That's the highest increase in the state and the 10th highest in the U.S.

However, all Floridian taxpayers may suffer from higher taxes come the first of the year.

For example, if you live in Pensacola, the average taxpayer may see a $2,791 tax increase.

The average taxpayer in Tallahassee could see taxes go up by $2,905.

If you live in the Orlando area, your taxes could go up on average by $3,725. St. Petersburg taxpayers might see an increase of $3,250.

An average tax return in Port St. Lucie might pay an additional $3,883 in taxes next year.

And taxpayers on the west side of Miami could see their tax returns increase by $2,952.

If you think retirees will be spared, think again. Taxes also go up on dividends and capital gains on Jan. 1 unless Congress and the president act, and we estimate that the average retiree tax return will contain an additional $857 in taxes.

Low-income workers will see an average of $1,158 more in taxes. Indeed, the typical American family, the mainstay of the economy, will be hit hard: that tax return will increase by $4,138.

What should we do?

Even though "Taxmegeddon" is rushing toward us, there's nothing inevitable about its arrival. We can avoid the economic and personal financial calamities of raising taxes in a slow economy, but Congress and the president must act.

Here's what Congress should do.

First, Congress needs to act before its August recess to permanently extend the tax relief of 2001 and 2003. It has temporarily extended these important tax cuts many times before. Permanently extending them should not be a big political stretch, if Congress also takes the first steps toward tax reform.

Second, Congress then should turn to the other tax increases (from the payroll tax to the new Obamacare taxes) and quickly remove the uncertainty that hangs over business and personal decision-making.

Imagine trying to decide about your child's college or a retirement date if you don't know whether you'll have the money after taxes to follow your current plans. Congress and the president need to stop playing politics with the taxpayers' income.

Taxpayers in Florida and around the country will have to keep pressure on their congressional representatives to act now on expiring tax policies. If Congress and the president do what they have been doing, we'll all be even more nostalgic for 2012 as we pack up our New Year's party gear in 2013.

William C. Beach is director of The Heritage Foundation's Center for Data Analysis and lead author of the 2012 Index of Dependence on Government.

First appeared in Orlando Sentinel

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