Hugh Wood, Atlanta, GA
The Era
of USA low taxes is in sunset. The tax
hammer is upon us.
Why
editorialize it.
2013%
INCREASES IN FEDERAL TAX BRACKETS
For
those of us who actually pay taxes, federal taxes in 2012, are, to wit: “Marginal federal income-tax rates (for the
four brackets) [are] 25%
28% 33% 35.”
[1]
After
January 1, 2013, they will rise to:
The “marginal
federal income-tax rates (for the four brackets) [will jump to] …28% 31%
36% 39.6%. The child tax credit
[will] fall to $500 from $1,000. Id.
A
MEDICAL TAX ON CAPITAL GAINS AND DIVIDEND INCOME
After
January 1, 2013, individuals will see a new tax for medical care imposed on
capital gains and dividend income.
“[T]he new 3.8% MedicalCare tax, and those rates on capital gains and
dividends [will jump] to 23.8% and (in the top bracket) 43.4%. Id.
From
other sources, additional relevant tax hammers are:
A NEW SURTAX
ON INVESTMENT INCOME
The
2013 a new Surtax on Investment Income – will bring a $123 billion tax increase:
This is a new, 3.8% point surtax on investment income earned will impact
households making at least $250,000 ($200,000 single). This will result in the
following top tax rates on investment income:
Capital Gains
|
Dividends
|
Other*
|
|
2012
|
15%
|
15%
|
35%
|
2013+ (current
law)
|
23.8%
|
43.4%
|
43.4%
|
The
table above also incorporates the scheduled hike in the capital gains rate from
15% to 20%, and the scheduled hike in dividends rate from 15% to 39.6%. [2]
MEDICARE
PAYROLL TAX: 3.8% UP TO $250,000
The new
2013 Medicare Payroll Tax Hike – will bring an $86.8 billion tax increase: The
Medicare payroll tax is currently 2.9% on all wages and self-employment
profits. Under this tax hike, wages and profits exceeding $200,000 ($250,000 in
the case of married couples) will face a 3.8% rate instead. This is a direct
marginal income tax hike on small business owners, who are liable for
self-employment tax in most cases. The table below compares current law vs. the
2013 Medicare Payroll Tax Hike:
First $200,000 ($250,000 Married) Employer/Employee
|
All
Remaining Wages
Employer/Employee
|
|
Current Law
|
1.45%/1.45%
2.9%
self-employed
|
1.45%/1.45%
2.9%
self-employed
|
2013 Tax Hike
|
1.45%/1.45%
2.9%
self-employed
|
1.45%/2.35%
3.8%
self-employed
|
Id.
THE
DEATH TAX RETURNS WITH A VENGEANCE (55%)
Under
federal estate tax law for 2011 and 2012, most of the wealthiest 1% of American
households are not subject to estate tax liability. The large estate tax
exemption is presently at $5.12 million per spouse. This means that with
nominal planning households worth less than $10.24 million can avoid the estate
tax.
Under
the new January 1, 2013 Estate Tax scheme, taxable estates over $1 million will
be subject to estate tax. The maximum
marginal tax rate of 55% will begin at $3 million. [3] So,
put that 55% tax in your tax hat and
smoke it. [4]
Why
editorialize this. The tax hammer is
upon us.
Hugh Wood,
Esq.
Wood &
Meredith, LLP3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.comtwitter: USALawyer_
Phone: 404-633-4100
Fax: 404-633-0068
[1]
Pethokoukis, James, The
American Enterprise Institute, August 1, 2012.
[2]
Americans for Tax
Reform, September 2012
[3]
Forbes June 2012 See
also, “Top Estate Tax Rates Set To Rise To 55 Percent In 2013.” Gladstone, Beth, ReutersMoney. Reuters.
[4]
While perhaps a bit extreme, consider the George Steinbrenner’s
(owner of the NY Yankees at death) estate.
(1930-2010). Steinbrenner’s
estate was considered to be worth $1,100,000.000.00. Dying in 2010 his estate paid zero (0%)
estate taxes. However, if Steinbrenner
had died in 2013 his estate would pay $605,000.000.00 in estate taxes (less, an
exemption of 10.5M which I did not bother to calculate).
So, under 2010 law his heirs divide: $1,100,000.000.00.
But,
Under 2013 law, his heirs would divide only: $495,000.000.00. And, the US Treasury has to be paid IN
CASH. Thus, the Treasury gets all the
cash and the estate (mostly) gets left with all the non-liquid assets. In many cases, this is the non-liquid real
estate.
