Higher Federal Taxes in 2013


Higher Federal Taxes in 2013




It is official. 77% of all Americans will face higher federal taxes in 2013. This figure was released by the Tax Policy Center in early January 2013.

The higher federal taxes in 2013 are a result of the increase in the payroll tax.

The remaining Americans will see a boost in their taxes as a result of The American Taxpayer Relief Act (TATRA) or as commonly called Obamacare.

Thanks to the TATRA the payroll tax increased by 2%. This means for every $100 you earn in 2013, you’ll take home $2 less than you did last year.

Said another way, for every $100 bill you are supposed to receive, you will receive only $98. Smart people know that is NOT a very good exchange.

This does not include other tax provisions in the bill. Higher federal taxes in 2013 were actually the main thrust behind settling the charade called the fiscal cliff. The proof is in the bill.

Take the people who make over $400,000 a year and the family earning more than $450,000 a year. Their taxable income will rise by almost 5 percentage points. This is on top of the 2% hike in payroll taxes.

As you probably have deduced the promises to raise taxes on only the wealthy suffered a hit. You were included in the bracket they touted as wealthy because your payroll tax rate was increased.

What was left unsaid was the politicians define the term wealthy. The citizen only suffers the consequences related to their definition.

TATRA also belied the hotly debated quote of almost half of Americans don’t pay federal income taxes. The payroll tax took care of that topic.

The Americans who do not pay federal income taxes do not pay taxes because of credits and deductions written into the tax code.

For example, contributions to certain types of retirement programs receive favorable tax treatment in the way of deductibility.

Childcare expenses and standard deductions along with certain other deductions can effectively eliminate any tax liability a couple with children earning $51,000 may face.

Current rates, if all deductions and credits were taken show the couple would actually be owed money by the IRS.

In certain cases wealthy Americans who earn over $1 million don’t have to pay federal income taxes either.

For example, if their business losses offset positive income or, if they’re given credit for foreign taxes to avoid double taxation.




What all this boils down is the way the tax code is written. No matter what people earn, they all agree that income taxes are a point of contention in this country.

Higher federal taxes in 2013 may be the impetus to simplify the tax code.

Everyone can point to some inequities they have personally encountered in the tax system. They want a code that is easy to read, easy to apply and easy to accept.

While no one can guarantee 100% that higher federal taxes in 2013 will bring about a tax code everyone can understand and easily comply with, the higher taxes certainly will be a thorn in people’s side.


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