Tax Hike for the U.S.?
September 4, 2010 12:29 AM   Subscribe

Are most U.S. citizens looking at a federal tax hike next year? I can't seem to find reliable data on this. Would such a hike apply to money earned 2010 or 2011?
posted by The ____ of Justice to Work & Money (15 answers total)
The bush tax cuts are set to expire at the end of the year or something like that.

The Obama administration has said they want to repeal the cuts for all but those making over 250k, but who knows if they'll be able too. According to this WSJ article the rates would go up by about $400 for an individual making $40k or $1.6k for someone making $80k. There are some other figures in there as well.
posted by delmoi at 1:01 AM on September 4, 2010

If Congress doesn't get a deal done, the tax hike will apply to income earned in 2011. It seems fairly certain that there will be support for some kind of deal. I'd be shocked if any of the cuts that apply to most of America don't get renewed. The things that could face opposition from the Dems would be capital gains and tax rates for high earners as delmoi points out. Unless the Republicans are prepared to sacrifice the whole package without the breaks for the wealthy, which seems unlikely, some kind of deal seems inevitable.
posted by Lame_username at 1:23 AM on September 4, 2010

Lots of hysteria out there on this issue. Here are a few of the more balanced articles that I could find:

2011 Tax Increases

Details about tax changes in 2011
posted by triggerfinger at 1:27 AM on September 4, 2010

US citizens who work at more than one job will certainly see a gigantic tax hike when they go to do their 2010 taxes. That stimulus thing only allowed for the tax credit to be taken, by the worker, for one job. However, every employer must allow for it, meaning you're getting money in your paychecks that you'll have to pay back. Why, you ask? I asked this too, and what it comes down to is, if you worked more than one job in 2010, each employer took out the tax credit. But you only get to "keep" one employer's worth of credits. Therefore, your second job's worth of tax credits will need to be paid back unexpectedly. (It was like this last year, too). I had to pay quite a bit last year for the privilege of having more than one job, and my 2010 tax returns will KILL me (I had 3 jobs at the same time this year, and I have to pay back the tax "credits" for two of them). Because, you know, most people who work more than one job do so because they're rich.

Aside from that, I couldn't say if there's a national tax hike. It will sure be wonderful if there is, though!
posted by deep thought sunstar at 2:14 AM on September 4, 2010 [1 favorite]

Go to, a good source of usually objective counters to political disinformation. The current "Ask Fastcheck" item on the right has a lengthy item addressing this issue.
posted by megatherium at 4:25 AM on September 4, 2010

deep thought: That happens regardless of the tax cut/hike/credits.

The taxing structure works (very generally) like this:

You owe:
10% of the first $8375, plus
15% of the amount between $8375 to $34,000, plus
25% of the amount between $34,000 to $82,000, plus
28% of the amount between $82,000 to $171,850, plus
33% of the amount between $171,850 to $373,650, plus
35% of any income over $373,650.

Employers withhold taxes based on a synthesis of that schedule. If they pay 24 times per year, they withhold the percentages above on the amounts/24. So on each paycheck, you pay 10% of the first $349, 15% up to $1417, and so on.

That is the minimum requirement by the IRS. It is up to the employee to make sure more is withheld if they don't want a big bill in April.

Anyone who works two jobs, (or a married couple filing jointly) has this issue. Everyone pays the same taxes on their income across all jobs. If I make $100,000 on one job, and you make $100,000 across three, we owe the same amount of tax. But we will have different tax returns- I'll probably get a refund, because I had more than I owed taken out, and you will get a bill, because you had less than you owe taken out.
posted by gjc at 6:43 AM on September 4, 2010 [2 favorites]

The answer is "yes." The Republican position is that they'd rather see all the Bush tax cuts phase out than permit only the tax cuts for higher earners and upon investment income to phase out. Obama continues to insist that the tax cuts must be extended but only for low levels of earned income.

If this state of affairs continues through the election, and Republicans do well in the election, than it will become a question for the "lame duck" session -- the outgoing Congress's November-December working period. In my opinion the political calculus makes it quite possible that nothing will happen, and all the Bush tax cuts will phase out across the board, meaningfully increasing income taxes on everyone.

Why do I think that?

For Obama, it's an appealling state of affairs. He gets to paint Republicans as friends of the rich, and tax-raisers to boot, and he appeases such deficit hawks as remain among Democrats and moderates because the revenue increases will be substantial. Lower than projected deficits will be a nice thing to tout in November 2012 to the white college grads who gave him his margin of victory in 2008.

For Republicans, it's appealling too. The political environment is such that it is hard effectively to paint them in the eyes of swing voters as the "pro-tax" party, and they simply aren't scared of the friend-of-the-rich appeallation, which Republicans have handled successfully for time immemorial. Also, and this is both a political and a policy advantage, Republicans see that there was a grave error in the Bush tax cuts on lower-earning people: when you transform people from net taxpayers to net tax recipients, you take away their incentive to see the world in a fiscally conservative way. A nation of welfare recipients is no place that a Republican wants to be.
posted by MattD at 6:58 AM on September 4, 2010

[few comments removed - folks, this needs to be answers to the questions and not complaints about taxes (or tax advice) thanks]
posted by jessamyn (staff) at 9:05 AM on September 4, 2010

We won't know exactly who will see a growing or shrinking tax burden until congress extends, alters, or allows the Bush cuts expire, but a Washington Post graphic mapped out three scenarios, each broken down by income percentile and average tax hike or cut within that income group.

The comprehensive data underlying the graphic came from the great folks at the nonpartisan Tax Policy Center.
posted by celilo at 10:29 AM on September 4, 2010

Sorry, those are income quintiles, not percentiles, on the graphic. But you get the idea.
posted by celilo at 10:31 AM on September 4, 2010

It is an interesting question, mostly because of how the bill was passed in the first place.

Taxes will go up if nothing is done, but it won't technically be a tax 'hike', because they are simply reverting back to what they were before the bill was passed. Nobody is acting to raise taxes. It is sort of like letting a contract expire versus firing someone.

I would hope that Obama is politically smart enough to say something like "If the Republicans were truly concerned with lower taxes, they wouldn't have made it a temporary cut. Instead, they decided to play politics with your pocketbook and the stability of the nation by allowing this bill to expire in the middle of the next president's term. I would love to lower taxes for everyone, but the stability of our national economy demands that we return to the tax rates we all lived with before the Republicans lowered them without regard for the consequences. Those lower taxes didn't fuel an expansion or improve the economy- no, since those taxes were lowered, our financial markets have collapsed, our debt has gone up, and our median income has stagnated. You can't lower taxes until you lower spending. Now, here is how I am lowering spending. If my plan works, we will see permanant tax cuts in the next X years."
posted by gjc at 10:46 AM on September 4, 2010

How does this affect freelancers or the self-employed?
posted by Ideefixe at 11:00 AM on September 4, 2010

Indeefixe, my understanding is that taxes for freelancers and the self-employed differ only regarding Social Security and Medicare taxes (f'lancers and the self-employed pay both the "employer" and "employee" portions of this tax). These are known as payroll taxes, and are different from individual income taxes.

The Bush-era tax cuts relevant to 2011 tax changes affect individual income tax rates, and not, to my knowledge, federal payroll taxes.
posted by celilo at 11:15 AM on September 4, 2010

This completely depends on your tax situation.

When the Bush tax cuts were put in place, I calculated my taxes on both the new and old rates and found that I saved a grand total of $90.

That WSJ article is horrible. It does not take into account any of the deductions available to taxpayers. It's not clear even if they take the standard deduction into account.

My guess is (based on a sample size of 1) that most middle class folk will see a rise on the lower end of the numbers WSJ has.
posted by Arthur Dent at 9:34 AM on September 5, 2010

Thanks very much everyone. There has been a lot of hysteria about this, so your answers have been very helpful, reasonable and realistic compared to what's in the (ugh) news.
posted by The ____ of Justice at 1:38 AM on September 10, 2010

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