In addition to today being Tax Day, it’s also, coincidentally, “Tax Freedom Day” — meaning that it has taken from January 1 until now for Americans to earn enough money to pay this year’s federal, state, and local tax bill — 29.2% of all our income. In other words, for the first 111 days of the year, everything you earned went straight to Uncle Sam. Compare that to back in 1900, when Americans paid only 5.9% of their income in taxes and Tax Freedom Day came on January 22.
The Tax Foundation reports that because of higher federal income and corporate tax collections, Tax Freedom Day came four days later this year than last. And the bad news is that unless Washington takes action, it will take working Americans 11 more days to meet next year’s tax burden.
That’s all due to Taxmageddon — a slew of expiring tax cuts and new tax increases that will hit Americans on January 1, 2013, amounting to a $494 billion tax hike. Heritage’s Curtis Dubay reports that American households can expect to face an average tax increase of $3,800 and that 70 percent of Taxmageddon’s impact will fall directly on low-income and middle-income families, leaving them with $346 billion less to spend. Dubay explains some of the immediate impacts:
If Congress fails to act, workers won’t have to wait very long to feel the effects. Every payday, they would see a jump in their payroll tax as it takes a bigger bite out of every paycheck. And that only reflects one of the direct hits they’ll face. They’ll feel the pain of other tax hikes they won’t pay directly, like the health care surtax on investment income and salaries over $250,000 — which begins in 2013 along with five other Obamacare tax hikes — because these hikes will slow job creation by taking away resources from businesses, investors, and entrepreneurs.
That fact, though, isn’t making its way into President Obama’s talking points. He’s not mentioning that, absent action, Americans will pay higher income taxes, payroll taxes, and death taxes. He hasn’t spoken about the impending increase in the marriage penalty, the decrease in the child tax credit and the adoption credit, or how those who get tax breaks for education or dependent care costs will see them decreased. He hasn’t mentioned the new taxes under Obamacare, or how middle-income families will be forced to pay higher taxes under the Alternative Minimum Tax — a measure that was only supposed to impact “the rich.” Sound familiar?
Instead of dealing with Taxmageddon, President Obama wants to change the subject with a gimmicky policy like the “Buffett Tax.” The Senate obliged him yesterday by voting on this distraction. Fortunately, it was rejected. Still, while President Obama trains his fire on this class warfare policy, he ignores that if Taxmageddon strikes, the lower and middle class Americans that he says he is fighting for will pay substantially more in taxes to the federal government starting on January 1. Call it the unadvertised side effect of Barack Obama’s failed leadership.
President Obama talks about how this is not a “perfect world,” but in a better world Washington would get its act together, stop Taxmageddon, prevent the American people from suffering the effects of a massive tax hike, and unleash the economy from today’s uncertainty. Then President Obama and Congress would set their sights on fundamental tax reform like the New Flat Tax proposed in Heritage’s Saving the American Dream plan. That’s an attainable goal that doesn’t require perfection.
Stopping a $494 billion tax increase shouldn’t be a contentious partisan issue. As President Obama might say “it just makes sense.” This is the perfect opportunity for Washington to show voters that it can do important things, even in an election year. When it comes to stopping Taxmageddon, the sooner the better.
- What’s President Obama’s answer to high gas prices? More government spending and regulation. He’s unveiling a $52 million plan today that would increase federal supervision of energy traders on Wall Street.
- Following the news of the General Services Administration’s $823,000 Las Vegas conference, the agency’s inspector general is investigating other wrongdoing, including possible bribery and kickbacks.
- As Apple goes, so goes the stock market? The maker of the iPad and iPhone saw a 4.1 percent decline in its shares on Monday, and it’s down 9.9 percent from its April 10 peak. Given the company’s size, both Nasdaq and the S&P 500 felt a negative impact.
- Riding on the back of a modified jumbo jet, the space shuttle Discovery is on its way from the Kennedy Space Center to the Smithsonian National Air and Space Museum. It is the most-traveled space vehicle in NASA’s retired shuttle program.
- A new poll shows that Americans support the structural reform of a premium support model for Medicare. Read more about it on The Foundry.