What's up with the Tax Hike Talk?
Now that the election’s over and the fiscal cliff is looming, Congress and the White House are sparing again over taxes and how to fix the impending issues. The newest slavo of talks (or disagreements, depending on your perspective) focuses on the impact of tax increases on the “middle class.” President Obama has identified this group as any household earning less than $250,000 per year.
The White House has asked Congress to extend the existing tax cuts for all households earning less than $250,000, and also fix the Alternative Minimum Tax system (which was established decades ago but has never been adjusted for inflation).
What’s not said in this rhetoric is that these tax cuts will not apply to households above the $250,000 level (called the “rich” by President Obama). Taxpayers in this category should expect substantial tax increases in 2013 and beyond under the current administration’s approach.
A bill reflecting these changes to retain tax cuts for households below $250,000 and increase taxes for those above this threshold has already been passed by the Democrat controlled Senate but has yet to clear the Republican controlled House of Representatives.
The discussions over the next few weeks are likely to continue in earnest with plenty of sparks, accusations and acrimony along the way. In the end, it’s likely that many of the tax cuts will be retained for lower income earners while being eliminated for any who are considered wealthy. No matter what happens, it’s likely a good bet that focusing on reducing overall taxable income will be the best strategy for 2013.
By: Evan A. Nielsen