It’s about time for us to uncover our eyes and take a hard look at what 2013 did to our finances.
Did you feel the pinch of the 13 tax hikes that hit Americans this year?
Before you review the list below, put these two on your watch list for 2014:
- Obamacare’s individual mandate. Beginning in 2014, it’s mandatory to purchase health insurance. If you don’t, you’ll pay a penalty that dramatically increases over time. It starts at $95 or 1 percent of your income (whichever is greater). It rises to $325 or 2 percent of income in 2015, and $695 or 2.5 percent of income in 2016.
- Obamacare tax on insurance companies. If you liked seeing your premiums go up, you’ll love this new tax on health insurers—which they are most likely to pass on to you.
As you start reviewing your tax information for 2013, here’s what you’re contending with.
The 13 Tax Increases of 2013
1. Payroll Tax: increase in the Social Security portion of the payroll tax from 4.2 percent to 6.2 percent for workers. This hit all Americans earning a paycheck—not just the “wealthy.” For example, The Wall Street Journal calculated that the “typical U.S. family earning $50,000 a year” would lose “an annual income boost of $1,000.”
2. Top marginal tax rate: increase from 35 percent to 39.6 percent for taxable incomes over $450,000 ($400,000 for single filers).
3. Phase out of personal exemptions for adjusted gross income (AGI) over $300,000 ($250,000 for single filers).
4. Phase down of itemized deductions for AGI over $300,000 ($250,000 for single filers).
5. Tax rates on investment: increase in the rate on dividends and capital gains from 15 percent to 20 percent for taxable incomes over $450,000 ($400,000 for single filers).
6. Death tax: increase in the rate (on estates larger than $5 million) from 35 percent to 40 percent.
7. Taxes on business investment: expiration of full expensing—the immediate deduction of capital purchases by businesses.
Obamacare tax increases that took effect:
8. Another investment tax increase: 3.8 percent surtax on investment income for taxpayers with taxable income exceeding $250,000 ($200,000 for singles).
9. Another payroll tax hike: 0.9 percent increase in the Hospital Insurance portion of the payroll tax for incomes over $250,000 ($200,000 for single filers).
10. Medical device tax: 2.3 percent excise tax paid by medical device manufacturers and importers on all their sales.
11. Reducing the income tax deduction for individuals’ medical expenses.
12. Elimination of the corporate income tax deduction for expenses related to the Medicare Part D subsidy.
President Obama demanded these higher taxes, but they did nothing to address the actual cause of our deficit and debt problem: too much spending. The proper way to address this problem is through reforms to entitlement programs.
President Obama promised the American people a “balanced approach” of tax increases and spending cuts to reduce deficits and debt. He achieved the tax increase portion of that approach. Now Congress needs to force him to follow through on the spending cuts.