Saturday, December 18, 2010

The New Tax Law: Gifts For All

United States Capitol in daylightImage via Wikipedia
The Congress has prepared for us a nice Christmas gift. The new tax law is ready to go the president for signing. He will add the ribbon and bow to it. The label will say To: The US Taxpayer, From: The Gang up in D.C. When we open it up we will see it has a little bit of everything in it. Also it will be the gift that keeps on giving all year.

The gift will be a 2 percent cut in Social Security payroll tax.  If you make $50,000, for instance, you'll get an additional $1,000 in your paycheck. Weekly, that's about $19.23. If your household takes in $75,000, you'll get an additional $1,500, or about $28.85 a week.

There is something even if your unemployed. You will receive an additional 13 months of benefits.

The other changes are basically a continuation of current law.Federal income and capital-gains tax rates will remain the same as they have been, at least for the next two years. The standard deduction for married couples will remain the same for that period, too. Credits such as the Child Tax Credit, the Earned Income Tax Credit, the Dependent Care Credit, Studen Loan Interest Deduction, and the American Opportunty Tax Credit for higher-education expenses also remain the same.

The deductions that were going to expire in 2011 will continue through 2012. They are deductions for state and local sales taxes, higher education tuition and qualifying teacher's classroom expenses. Retirees can also use the proceeds from their IRA's to make charitable contributions. For the next two years, the rules and limits for all of these deductions remain the same.

We are going to lose some tax breaks also. A tax credit of up to $1,500 for installing energy-efficient home improvements is reverting to a limit of just $500. And the Making Work Pay tax credit has been eliminated; under the new law focusing on a 2-percent payroll tax reduction, an estimated 51 million households will actually bring home less in 2011 next year.

Again the Congress has done it's work in the usual way. Spend more money and not address the underlying problem. Reducing Social Security payments is a kind of stimulus. Continuing unemployment benefits is also a kind of stimulus. Congress has put a bandage on the problem as usual. They need to get together and see that that the other way to address budget problems is to reduce spending. They never can do that. When you or I have budget problems we cut our spending. The government can do that to.

8 comments:

  1. All I want for Christmas is a 5% across the board spending cut for the federal budget. No agency spared.

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  2. I would go for a 10 % cut. They will only knock it down to 5%.

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  3. I think it should go department by department. Some agencies are quite efficient and others (dept. of ed) should be almost eliminated. I don't want the FDA to take a cut- but there is some major work to do in the defense department with the Rumsfield plan of privitazation. We, the people, are paying more for the same service by contracting it out....
    I'm wondering how many more of those awesome (expensive) scan machines we get to buy for airports as well....

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  4. Instead we get the lump of coal... more debt to pay later.

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  5. I am with Janette on this one. A 5% or 10% cut on an efficient department would hurt that departments efficiency significantly. However, if you are working for a mismanaged department, they could cut the 10% out of their travel budget and it would be business like usual.

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  6. There is so much bloat and duplication in government programs a 5 - 10% across the board would barely be felt, but would do wonders for the deficit. The Feds need to what many many states and private business have done over the past 2 - 3 years.

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  7. It may only be a small difference, but at least there's a tax reform.

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  8. It is a small difference but budget cutting should be on deck as much as spending is.

    ReplyDelete

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