This week’s CBTV show is entitled, “A Taxing Situation: How the NEW Federal
Tax Code May Hurt or Help Your Finances!”
The 2012 U.S. federal tax code will
remain largely the same as last year, due to the extension of the “Tax Relief,
Unemployment Insurance Reauthorization, and Job Creation Act of 2010.” However, President Obama alluded to a
significant change in the near future for some Americans, during his annual
State of the Union address, on January 24th.
As of now, the lowest individual income tax rate will stay at 10%
throughout 2012, rather than rising back UP to 15%, and the highest income tax
rate will remain at 35%, rather than increasing to 39.6%. The 15% maximum tax rate on long-term capital
gains and dividends were also extended through 2012, fueling a heated debate on
whether or not the highest income earners in our country should pay more taxes
on their investment earnings.
If you tuned into the annual State of
the Union address last week, you probably saw Warren Buffett’s secretary Debbie
Bosanek (boe-SAHN-eck) sitting near the First Lady, as a special guest of
President Obama. You would have also
heard about the so-called “Buffet Rule,” which stems from the statement made by
Buffet that his secretary pays a higher income tax rate than he does! In an editorial Buffet wrote last August for
The New York Times, he admitted that he has a 17.4% effective tax rate. The “effective tax rate” is the net rate paid
by a taxpayer, when adding up the total amount of taxes paid and dividing it by
the total taxable income. Buffett argued
that the rich should pay taxes at a higher rate, even though he himself makes a
substantial part of his annual income off investment earnings taxed at the 15%
rate. As a national proponent for
increasing taxes on the wealthy, the “Buffett Rule” was first introduced last
September by President Obama, as a means to, as he puts it, “alleviate income
inequality in the U.S., between the top 1% of Americans and the remaining 99%.”
In his State of the Union address, President Obama updated the “Buffet Rule,”
by proposing a minimum tax rate of 30%, on those who earn at least $1 million
dollars annually.
The capital gains tax rate has been a
hot topic in the media recently, as presidential hopefuls release their tax
returns in advance of the upcoming November election. Billionaire Warren Buffett thinks he has the
answer to the debate. As we all know, he is one of the richest men in the
world, but he’s not leading by example when it comes to the taxes he owes the
IRS. It might seem like an easy fix to
simply double the taxes on long-term capital gains for the rich, but the
consequences of that one single action could derail economic growth for years
to come. If you think about it –
long-term capital gains are taxed at a lower rate to encourage individual
investments into companies, whose growth fuels the economy. Investors have already been taxed on their
investment principal, and increasing taxes on any potential earnings to 30%,
could detour investors from investing at all, as the risks of investing may
start to outweigh the potential rewards.
What the U.S. economy really needs right now, are more people investing
in our country and corporations, not less!
I would like to hear from you on this
important topic of “taxes.” Do you think we’re paying too much in income and
capital gains tax, or not enough? Let me know.
Until next week, Dump Debt, Invest
Wisely, Believe in Yourself and Make it Happen!
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