I have no intention of preaching politics here. Truly. I do have very strong political views, so this may be tough. I may not be able to prevent some of them from leaking into my words. Please bear with me! To the best of my ability, I will keep this as non-partisan as possible.
Rather than politics, my message today is one of awareness and preparedness. This isn’t something Americans, especially business people and business owners, can ignore. There is a tsunami of tax increases building, the first wave scheduled to make landfall on January 1, 2011. My message to my readers: Be aware and take action as appropriate. (Yes, that may include political action. I will leave that up to each of you.)
The tax cuts enacted during the Bush administration are expiring in January of 2011. Contrary to popular myth and political sound bites, these tax cuts were NOT just for the rich. They were across the board cuts in tax rates. All of these end in January, because the current Congress and Administration have chosen to allow it.
In addition to the tax rate increases (the bottom rate, for example, will go from 10% back to 15%), the corrections made to the marriage penalty expire. Married couples with both spouses working and making similar amounts of money will wind up being taxed more because they are married.
Another biggie is the Estate Tax, also commonly called the death tax. The rate goes back to 55%, if I remember correctly. In addition, if your estate tops $1 million (a very low ceiling when you consider the value of real estate in this area), you will have to pay Estate Tax. This number used to be about $5 million, if memory serves. (I promise to check exact numbers in a later post. Time presses this morning, but I want to initiate this topic without delay!)
I have two huge issues with the Estate Tax. (Sorry, but the opinion just had to creep in.) First, it is blatantly unfair. Those dollars have already been taxed during the deceased’s life time, with income tax, property tax, and capital gains taxes. Why tax them again? Second, this tax nails small business owners. Without careful tax planning and succession planning, many heirs wind up losing family farms and businesses because they can’t pay the taxes. The value is in land, fixtures, equipment, etc., all the things needed to run the business, not in cash. Many must liquidate critical assets or sell the business to raise the cash to pay the tax bill! Now, exactly how is this going to benefit our economy and the jobs picture, especially given that small businesses make up the lion’s share of the job creating engine of our economy? So, my major beef here is that this tax is really stupid!
Now, I realize that governments at all levels in this country are hurting for dollars, big time. Many are way past cutting fat out of their budgets and are slicing deeply into muscle. But time and again, they prove that raising taxes does NOT put more money into their treasuries. Au contraire. Taxes dampen the economy still further, resulting in less income, property, etc. to tax, so tax revenues drop. Read your history!
In contrast, tax cuts allow our economy to take off, producing more income and ultimately bringing more into the government coffers, even though they are collecting it at a lower rate. Again, history has proven this over and over. Now, isn’t a booming economy with lots more jobs and dollars for everyone, including government, the real goal?
Please, gentle readers, forgive this opinionated and VERY concerned blogger and give all of this some serious thought. We must all prepare for the coming onslaught. And, as appropriate, we must take action.