It’s a game of “Push me-Pull you” when it comes to blaming each other on Capitol Hill. The Bush tax cuts are set to expire in a big way in 2011 and the Obama camp has been playing with health care for so long that they forgot to look at the taxing situation, if you pardon the pun. What’s left is a middle American in a desperate situation with a Congress that is extremely divided.
You have Republicans saying Democrats like to tax and spend and you have Democrats saying Republicans only give tax breaks to the wealthy. Neither is totally right nor wrong, but Americans now are paying for a war against religious fundamentalists and a mortgage crisis that exploded into the stratosphere, not to mention numerous government bailouts, which have all cost us dearly.
Come January 1, 2011 the middle class is in a heap of trouble when the Bush tax cuts expire:
The top income tax rate returns to 39.6%;
The max long-term capital gains tax returns to 20%, while those in a lower tax bracket will resume paying taxes on long term gains;
The child tax credit is cut in half to $500; and
The partial credit for payroll taxes is eliminated.
The Obama Administration did manage to pass The Small Business Jobs Act , which was signed into law back in September. It actually provides a few breaks for small business owners:
There is a larger cap for small business Section 179 deductions – that’s the deduction you can take for qualified business property – it has been increased to $500,000 for 2010 and 2011 but will drop back to $25,000 in 2012;
You will also get a break on self-employment tax which will be reduced by the amount you pay for health care insurance on your own premiums (not those of your employees);
Eliminations of capital gains tax for small business investors who hold their investments for five years;
A doubling of the start-up cost deduction for small entrepreneurs from $5,000 to $10,000; and simplified Cell Phone deductions among others.
I am no financial genius, nor tax attorney, but I’m thinking we should get rid of most of Congress and the IRS and go back to simpler times. Everyone pays a flat tax rate of 20% with only deductions for health care and mortgages. As for capital gains, if you are earning any then you should also pay 20% on long term and 25% on short term and losses can be carried forward until they’re absorbed. It’s easy, simple and can be managed without a PhD in international finance. Who’s with me?