Fiscal Cliff or Taxageddon?

Whatever you want to call it, the time to pay the piper is here.  Tax reform has been pushed and patched for over a decade now, and if the people in Washington can't come to a decision, then we all lose.  So what is in store if Washington can't get its act together by December 31, 2012?

·         Individual income tax brackets will change to 15, 28, 31, 36 and 39.6 percent, from the present levels of 10, 15, 25, 28, 33 and 35 percent.

·         The long-term capital gains tax rate will go from15% to 20%

·         Dividends will go from being taxed at a maximum of 15% to being ordinary income, taxed as high as 39.6%

·         The Alternative minimum tax (AMT), designed to ensure the very wealthy pay income taxes will capture a huge number of upper middle class taxpayers, all because the AMT does not adjust with inflation (how hard would that be to do Congress??)

·         Elimination of the cut in the payroll taxes.  Workers currently pay  4.2 % (a temporary reduction on the usual 6.2%)

·         Estate tax / Gift Tax/ GST Tax exemption amount will go down from $5,120,00 to $1 million and the estate and gift tax top rate will go from 35% to 55%.

·         $1.2 trillion in across-the-board cuts in federal spending since Congress couldn't come up with a deficit-cutting deal in January 2012.  Economists fear this could be saying hello to that double dip recession.

·         End of extended unemployment benefits.

·         A double-digit drop in Medicare reimbursements which could cause doctors to cease treatment of those over 65.

·         And don't forget that niggling $16.4 trillion debt ceiling we keep pushing up. 

Image courtesy of [digitalart] / FreeDigitalPhotos.net

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