Everyone’s paycheck is about to take a hit, and it’s not the boss’ fault. But some business owners say it’s a tough talk to have.
The rate of workers’ payroll taxes, which fund Social Security, has been 4.2% for the past two years. As of Jan. 1, it’s back to 6.2%, on the first $113,700 in wages.
That forced Mike Brey, who owns four Hobby Works shops near Washington, D.C., to notify his store managers about the upcoming change during a conference call Monday. He called the experience uncomfortable. “These are the people who can least afford it,” Brey said.
Brey said he can’t raise compensation to ease the pain. Enduring the recession meant cutting his own salary, firing workers, taking on half a million dollars in debt and raiding his own 401(k).
“Any business that survived the recession did so by digging a big hole,” Brey said. “We can’t dig any deeper.”
Related: How the rich will pay more in 2013
Payroll taxes are key for financing Social Security, and the break of the past two years has forced the government to replenish the funds with borrowed money. The tax break was always meant to be temporary.
Workers earning the national average salary of $41,000 will receive $32 less on every biweekly paycheck. The higher the salary (up to $113,700), the bigger the bite, but business owners say their lower wage employees will feel it most.
Of all the deductions woven into the sprawling U.S. tax code, few have been more fiercely guarded than the enormous tax break that lets homeowners deduct the interest they pay on their mortgages.
But as Congress and the White House negotiate the first major rewrite of tax laws in decades, changing the generations-old mortgage-interest deduction — which costs the government roughly $100 billion a year — has gone from far-off possibility to part of the conversation.
The outcome of that debate could have profound long-term effects on homeowners across the country — and particularly those in the Washington area, who tend to benefit from the tax break more than many other Americans due to the region’s hefty home prices and high incomes.
As the Obama administration and lawmakers on Capitol Hill scramble to defuse automatic spending cuts and tax increases set to take effect Jan. 1, a herd of sacred cows — from Social Security and Medicare to deductions for charitable giving and mortgage interest — are in danger of losing their untouchable status.
It’s about time for the rubber to hit the road on budget reform, and you can see the different lobbies pre-positioning and drawing their lines in the sand. Too many of the GOP and Democrat senators are going into this with the thought that it’s time to cut entitlements, but that’s wrong and unfair. Social Security, Medicare, Obamacare, and the rest should not be on the table.
People deserve the benefits of the social contract that they signed up for, not the GOP moving the goal posts just to save the uber rich a few percent on their taxes which they won’t really notice anyway.
We’ve already seen that type of reform already — my friend Digby has to wait 2 years longer for full retirement on Social Security than I do even though we grew up in the same place. The only difference is that I graduated a couple years later than her. That’s just not right nor fair since we’ve both been subject to the same deductions and scales most of our lives. We shouldn’t be disassembling these support systems for future generations for the greed a few just as they are becoming most needed.
Washington should stay away from touching the mortgage interest tax deduction, warns the U.S. housing industry.
Lately, housing is on the mend and one of the few bright spots in a lumbering economic recovery. Taking away a key tax break could throw a wrench into home buying plans and hurt a long-sputtering recovery.
Lawmakers in both parties are on the lookout for tax revenue as a way to avert the fiscal cliff.
But the housing industry is preparing to fight against any move to get rid of the mortgage interest tax break.
“[Getting rid of it] would throw the housing sector into turmoil … and chill the market just as it is trying to recover,” said Jerry Howard, CEO of the National Association of Home Builders.
If Congress drives the country off the fiscal cliff, Americans will face an unprecedented tax increase in 2013. It totals $500 billion and includes the majority of tax breaks enacted since 2001, as well as some of the most popular in the tax code. A middle-income family would see a tax increase of about $2,000, according to report from the Tax Policy Center.
Among the taxes in play:
The child tax credit: Under President George W. Bush’s Tax Relief Reconciliation Act, the maximum value of the credit was doubled to $1,000 per child, said attorney Adi Rappoport of the Gunster firm in West Palm Beach. Two years ago, Congress extended the credit until the end of 2012 and allowed families whose income tax is lower than the credit’s value to receive more of the credit in a cash refund.
The alternative minimum tax: This tax seeks to ensure that people who have access to certain deductions and credits — usually the wealthy — pay at least a minimum amount of tax. Congress has repeatedly patched this tax, which does not take inflation into account, to ensure that it does not apply increasingly to middle-class families. If Congress does not address this tax, 26 million households will face an average tax increase of $3,700, according to the Chicago Sun-Times.
Estate taxes: In 2012, a couple can give a gift or the estate of a couple can bequeath up $10 million tax free. If the estate tax break expires, that limit will drop to $2 million and 10 times as many estates would be hit by the estate tax.
Bush tax cuts: They benefited virtually anyone who filed a tax return but were most generous dollar-for-dollar to higher-income earners. The top income tax rate was reduced to 35 percent from 39.6 and the bottom rate to 10 percent from 15.
Payroll tax cuts: About 120 million households would be subject to a 2 percentage point increase in the payroll tax .
By Robin Abcarian, Los Angeles Times
August 5, 2012, 9:31 p.m.
Mitt and Ann Romney were easily able to afford a $12-million La Jolla home.
But that didn’t insulate them from the winds buffeting the real estate market in the months following their purchase in 2008.
After paying cash for the Mediterranean-style house with 61 feet of beach frontage, they asked San Diego County for dramatic property tax relief.
Romney, the presumptive GOP nominee for president whose wealth is estimated at $250 million, has rejected calls from Democrats and Republicans to release his income tax returns prior to 2010. But San Diego County assessor records shed light on one sliver of the couple’s personal taxes during that time: a months-long effort to reduce their annual property tax bill.
Initially, the Romneys asked that their 2009 assessment, $12.24 million, be reduced to $6.8 million, maintaining that their home had lost about 45% of its value in the first seven months they owned it.
Thirteen months later, after hiring an attorney to guide them, the Romneys filed an amended appeal, contending the home had suffered a less-dramatic fall of 27.3%, to $8.9 million.
They also filed an appeal for the 2010 tax year, claiming the house had dropped further, to $7.5 million, 38.7% less than the home’s assessed value.
As a result, the Romneys have saved about $109,000 in property taxes over four years.
They were far from alone in seeking a reduction. Since the real estate market crashed, about 250,000 San Diego County homes have been reassessed at lower values, sometimes at the owner’s request and other times at the county’s initiative.
The Romney campaign referred all questions about their La Jolla property taxes to Matthew A. Peterson, a lobbyist and attorney who helped the Romneys find the home. He has also guided them through the complex permit process for demolishing the home and rebuilding on the site.
I am firmly convinced Fox hires editors and authors, not based on their qualifications to report on specific subjects, but based on their ability to confirm right wing biases and talking points. It is becoming so obvious to anyone with a bit of self honesty and is able to recognize and step back from their own biases that Fox News is catering to and I propose, training the readers and watchers to be as unable to see beyond their biases as is mentally possible.
In an article complaining about how Obama is not attacking Romney’s policies but is attacking Romney’s fitness for office, a tactic much beloved by the right, called ‘poisoning the well’ or ‘ad hominem’ (something that was done to Obama in 2008, and is a valid method if it addresses what the candidate him/herself is using as a campaign issue) the author proceeds to poison the well against the report Obama used as a political wedge in a recent speech.
*Citing a report from the left-leaning Tax Policy Center, Obama said that Romney’s desire was to increase taxes on the middle class in order to offset revenues lost from tax breaks for the rich ‘like him.’
Framing Obama’s statement as a speculation on Romney’s personal desires makes it look like Obama is attacking Romney personally. It’s easy to show that Obama was talking about the effects policies Romney has leaned toward, but not fully qualified in a policy statement, will have on the US economy.
Here are Obama’s actual words:
“He’s not asking you to contribute more to pay down the deficit, he’s not asking you to pay more to invest in our children’s education, or rebuild our roads or put more folks back to work. He’s asking you to pay more so that people like him can get a big tax cut,” Obama told a crowd in Mansfield, Ohio.
Obama used the personal pronoun ‘he’ as a proxy for the right and the results to be expected from his (Romney’s) tax policy as shown by the report.
One of the main findings in the report is that the tax burden will be shunted from higher income to lower income families.
*The report speculates that in order for Romney to make his tax-cut plan ‘revenue neutral’ for the federal government, he and a theoretical Congress would have to close loopholes that would result in a net tax increase for middle-income earners.
**The above estimates assume that all available tax expenditures for higher-income households are completely eliminated—tax expenditures that include deductions for charitable contributions, mortgage interest, state and local taxes, and exclusions from income of health insurance and other fringe benefits. To the degree any of these were even partially retained for high-income households, the net tax cuts for high-income households and tax increases for low- and middle-income households would be even larger.
Note the point of it being ‘revenue neutral’ because that requirement limits the number of speculations that can be made in the various models. If taxes are reduced, in order to not increase the deficit, expenditures have to also be reduced (revenue neutral). Those reductions will hit middle and low income families the hardest.
** Specifically, it is not possible to design a revenue-neutral plan that does not reduce average tax burdens and the share of taxes paid by high-income taxpayers under the conditions described above, even when we try to make the plan as progressive as possible.
*This is something like when Obama was running against Rep. Paul Ryan’s budget plan and his team came up with their own set of cuts to reach Ryan’s fiscal goals and then touted them as fact. Since Romney is not looking to discuss which loopholes he would close, each tax break having its own ardent supporters, Obama and the Tax Policy Center are filling in the void with their own projections.
This is answered by the quote from the report given above and by other sections of that report. Go here to read the whole thing.
*This is all election-year blatherskite, since nobody knows what kind of Congress will be sitting come January or what condition the economy will be in a year from now. Change the set of assumptions and you change the outcome dramatically.
That is true as mentioned in the report - however, the outcomes get worse, not better.
*What matters is the way Obama is making policy personal here.
Then why did you bother mentioning the report? Oh, I know, so you can link the report, its results and Obama into one nice compact package that can be vilified with just a flip of your hair.
The rest of the article is a lesson in how to stretch out a whine to a massive blubber while preserving your original bad premise.
* Read more: foxnews.com
Washington (CNN) — Senate Republicans on Thursday blocked the No.1 item on the president’s congressional “to-do-list,” refusing to allow a vote on a bill that would give tax breaks for companies that “insource” jobs to the U.S. from overseas while eliminating tax deductions for companies that move jobs abroad.
In voting against the bill, Republicans raised both substantive and procedural problems with the measure.
The bill fell four votes short of the 60 needed to bring it to debate, with 42 voting against it. Four GOP senators — Scott Brown of Massachusetts, Susan Collins and Olympia Snowe of Maine and Dean Heller of Nevada — voted in favor of the bill.
The Bring Jobs Home Act would provide a 20% tax break for the costs of moving jobs back to the United States and would rescind business expense deductions available to companies that are associated with the cost of moving operations overseas.
The Republican-led U.S. House of Representatives defied a veto threat by President Barack Obama on Friday and voted to take money from his healthcare overhaul to extend low-interest rates for federal student loans.
On a mostly party-line vote of 215-195, the House sent the measure to the Senate where Obama’s Democrats are certain to reject it. Like Obama, they want to renew the low rate, but favor covering the one-year, $6 billion cost by ending a tax break for the rich.
The matter has emerged as the latest hot issue in advance of the November 6 congressional and presidential elections. Members on both sides are vying for the youth vote and the support of parents struggling help put their children through college.