...BUT...I wonder how many of those Obama voters, like Paul, Buzz, Sambo, Blackstone etc., even have a clue what putting that empty suit back in office will cost them???
Wanna "fact check" these numbers? Be my guest.
"The federal tax system is about to start robbing graves again," warns Byron King, referring to what he dubs the "Countdown to Taxmageddon"
Yesterday, we had Byron over to explain what we have to (not) look forward to come New Year's Day. Today, he's back and ready to discuss what this means for you... and what you can do about it before it's too late.
You might want to pour a stiff drink before we begin...
"Pretty much the entire U.S. workforce will take a pay cut of at least a few percent," says Byron -- assuming Congress does nothing before then.
"I suspect that when people see their January paychecks," he writes, "the paychecks with all the missing money -- they'll be collectively furious."
But it's not only the raw percentage of your taxable income at stake. "The end of Bush-era tax rates also impacts itemized deductions and personal exemptions," explains Byron. "That is, we'll experience dramatic changes to phaseouts and limitations. Thus, individual taxpayers, and many households, will lose some or all current personal exemptions and deductions, including mortgage interest, charitable contributions and more."
Meanwhile, the "employee portion" of Social Security tax -- 4.2% the last two years -- goes back to 6.2%. "This will hit everyone, down to the minimum-wage lunch ladies at the school cafeteria. Don't think that they won't notice.
"Also," Byron continues, "the new 3.8% health care tax will apply to all wages. This tax increase will increase the current Medicare hit on individuals from 2.9% to 3.8%. So if you work and receive a paycheck, the ‘employee portion' of your Medicare tax will increase from 1.45% to 2.35%. Your employer's portion will remain the same at 1.45%.
"Here's a table that illustrates the impact on a couple that brings home over $250,000 per year. In addition to the restored 2% FICA tax, this couple could be subject to marginal federal tax rates as high as 44.3% -- a 26% increase in effective tax rates just on the affected income -- with possibly higher state and local taxes on top of that.
"Meanwhile, for savers and investors," Byron continues as we try to catch our breath, "absent any legislative changes, more key tax rates will kick upward in 2013.
"Right away, taxes on passive, ordinary income, such as interest and dividends, will increase from 35% to 43.4%, including the health care tax," he says of earners in the highest bracket. "It's a big hit, considering that most dividend money has already been taxed before getting paid out, at state and federal corporate rates.
"The long-term capital gain rate will increase from 15% to 23.8%. This includes a basic capital gain increase from 15% to 20%, as well as a new 3.8% ‘health care tax' on interest, dividends and other passive income realized by ‘high earners' -- individuals earning more than $200,000 per year, or $250,000 for married taxpayers."
The estate and gift tax will also increase in 2013. Currently, the estate and gift tax exclusion is $5 million per person -- $10 million for a surviving spouse. Above that level, any excess is subject to a federal estate tax of 35%.
But unless the tax laws change, the maximum estate and gift tax rate will increase from 35% to 55% on Jan. 1, 2013. Worse, the exclusion reverts from $5 million to merely $1 million.
"Think about that $1 million exclusion," Byron implores. "If you own real estate such as a farm or a house in an upscale neighborhood or a couple of rental properties somewhere, you might be there now. Add in your personal property like cars, furnishings and such, plus bank and brokerage accounts. And don't forget that life insurance often winds up getting counted against that estate tax exclusion. It's not difficult for an ‘average' estate to exceed $1 million.
"Hunker down," says Byron, checking our pulse, "because this is going to get worse before it gets better."
With this in mind, Byron's recommendation in the current issue of Outstanding Investments pinpoints a company he says "pays you in what's essentially nontaxable dividends." Not a subscriber yet? Access here.