February 22 2013
U.S. News & World Report
January was a rough month for taxpayers: Nearly every working American kicked off the new year by opening a substantially shrunken paycheck. Taxpayers learned, contrary to the president's claim taxes were increasing on the rich "while preventing a middle class tax hike," the rich weren't the only expected to turn more over to Uncle Sam.
The fiscal cliff deal alone will increase tax-paying Americans' tax bill by an average of $1,635. For starters, most working Americans face a payroll tax that's almost 50 percent higher than last year's. But that's not the only new tax kicking in in 2013: There's marginal tax rate increases on the top individual income tax rate which will affect many small business owners, Medicare Payroll tax increases, and many other taxes that may not directly hit your paycheck, but will impact your economic fortunes nonetheless.
Perhaps the most detrimental new taxes are those that hinder investment and therefore economic growth.
Increases in taxes on capital gains, such as money made by selling real estate or stocks and bonds, will ensure fewer businesses take risks and have resources to grow. We cannot afford such hindrances to economic growth when over 14 percent of Americans are still unemployed or cannot find full time work.
Estate taxes also increase in 2013 from 35 to 40 percent on inheritances over $5.12 million. That may not seem like one that hurts you and me, but these new taxes mean that farmers and small business owners, whose wealth is wrapped up in land or equipment, will have less incentive to put in the extra hours and take the extra risks that go into building a fortune for the next generation. Instead of such productive work, they will instead have an incentive to hire lawyers and CPAs to help them avoid taxes after their deaths.
This one isn't making headlines, but the limit on the amount of money families may save inflexible spending accounts will mean hardship for many American families this year. You see, many parents with special needs kids have been able to stow away an unlimited amount of money into accounts protected from taxes in order to pay for education costs that can easily exceed $14,000 per year. Now inflexible spending accounts will be capped at $2,500, making it impossible for many parents to afford the education that best fits their child's unique needs.
Thanks to taxes in the healthcare bill, you may also find you are indirectly paying more for medical devices and services. Many medical devices, like MRIs, braces, and CAT scans, will now have a 2.3 percent excise tax. Hospitals will pay more—and those costs will be passed on to insurance companies and then on again to all of us through higher premiums—but those higher costs also may mean that hospitals try to make do with fewer of these devices. As a result, Americans will have less access to needed healthcare and services.
For years, the president has demanded taxpayers fund Washington's spending addiction. This was a focus of his State of the Union address, in which the word "tax" appeared a whopping 38 times. The president continues to demand the "rich" to pay more, but what President Obama has ignored is that no one is spared from these higher taxes. Moreover, taxpayers are already spending Washington trillions of dollars, but it seems no amount will satisfy Washington's insatiable appetite for spending.
In fact, the last thing Washington needs is more money. The nonpartisan Congressional Budget Office estimates President Obama's policies will already lead to a 25 percent increase in federal revenue over the next three years.
Can you imagine your salary rising 25 percent? Most working Americans are excited to receive a 3 percent raise in this economic climate. Yet Washington seems impervious to this economic reality, and instead just always demands more.
Washington wants once again to pass the buck to American families, and ask them to cut more from their own personal budgets, so politicians can continue to spend irresponsibly. It's time for Americans to say enough is enough; Washington, not taxpayers, should tighten their belts this time.