Liberty Trail--The Conservative Road to Freedom

"Follow the Money" most often refers to politics.  Here we follow what is happening in our economic world, that which is having huge negative impacts on our ways of life.

In just 5 months, on January 1, 2011, the largest tax hikes in the history of America will take effect.

They will hit families and small businesses in three great waves.

On January 1, 2011, here’s what happens... (read it to the end, so you see all three waves)...


First Wave:

Expiration of 2001 and 2003 Tax Relief.

In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families.

These will all expire on January 1, 2011.

Personal income tax rates will rise. 

The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed).  
     
The lowest rate will rise from 10 to 15 percent.  
     
All the rates in between will also rise.  
     
Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates.  

The full list of marginal rate hikes is below:

      The 10% bracket rises to an expanded 15%

      The 25% bracket rises to 28%

      The 28% bracket rises to 31%

      The 33% bracket rises to 36% 

      The 35% bracket rises to 39.6%

 Higher taxes on marriage and family.  

The "marriage penalty" (narrower tax brackets for married couples) will return from the first dollar of income.  

The child tax credit will be cut in half from $1000 to $500 per child.  

The standard deduction will no longer be doubled for married couples relative to the single level.  

The dependent care and adoption tax credits will be cut.

The return of the Death Tax.

This year only, there is no death tax.  (It’s a quirk!) For those dying on or after January 1, 2011, there is a 55 percent top death tax rate on estates over $1 million.  A person leaving behind two homes, a business, a retirement account, could easily pass along a death tax bill to their loved ones.  Think of the farmers who don’t make much money, but their land, which they purchased years ago with after-tax dollars, is now worth a lot of money.  Their children will have to sell the farm, which may be their livelihood, just to pay the estate tax if they don’t have the cash sitting around to pay the tax.  Think about your own family’s assets.  Maybe your family owns real estate, or a business that doesn’t make much money, but the building and equipment are worth $1 million.  Upon their death, you can inherit the $1 million business tax free, but if they own a home, stock, cash worth $500K on top of the $1 million business, then you will owe the government $275,000 cash!  That’s 55% of the value of the assets over $1 million!  Do you have that kind of cash sitting around waiting to pay the estate tax?

Higher tax rates on savers and investors.

The capital gains tax will rise from 15 percent this year to 20 percent in 2011.  

The dividends tax will rise from 15 percent this year to 39.6 percent in 2011.  

These rates will rise another 3.8 percent in 2013.


Second Wave:

Obamacare


There are over twenty new or higher taxes in Obamacare.  Several will first go into effect on January 1, 2011.  They include:

The "Medicine Cabinet Tax"

Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).

The "Special Needs Kids Tax"

This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit).  There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children.  

There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education.

Tuition rates at one leading school that teaches special needs children in Washington , D.C. ( National Child Research Center ) can easily exceed $14,000 per year.

Under tax rules, FSA dollars can not be used to pay for this type of special needs education.

The HSA (Health Savings Account) Withdrawal Tax Hike.

This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAsand other tax-advantaged accounts, which remain at 10 percent.


Third Wave:

The Alternative Minimum Tax (AMT) and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011, they'll be in for a nasty surprise-the AMT won't be held harmless, and many tax relief provisions will have expired.

The major items include:

The AMT will ensnare over 28 million families, up from 4 million last year.

According to the left-leaning Tax Policy Center, Congress' failure to index the AMT will lead to an explosion of AMT taxpaying families-rising from 4 million last year to 28.5 million.  These families will have to calculate their tax burdens twice, and pay taxes at the higher level.  The AMT was created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear.

Small businesses can normally expense (rather than slowly-deduct, or "depreciate") equipment purchases up to $250,000.  

This will be cut all the way down to $25,000.  Larger businesses can currently expense half of their purchases of equipment.  

In January of 2011, all of it will have to be "depreciated."

Taxes will be raised on all types of businesses.

There are literally scores of tax hikes on business that will take place.  The biggest is the loss of the "research and experimentation tax credit," but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced.

The deduction for tuition and fees will not be available. 

Tax credits for education will be limited.  

Teachers will no longer be able to deduct classroom expenses. 

Coverdell Education Savings Accounts will be cut. 

Employer-provided educational assistance is curtailed.  

The student loan interest deduction will be disallowed for hundreds of thousands of families.


Charitable Contributions from IRAs no longer allowed.

Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA.  

This contribution also counts toward an annual "required minimum distribution."  This ability will no longer be there.



PDF  Version  Read more: <http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171>; http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171#%23ixzz0sY8waPq1


And worse yet?


Now, your insurance will be INCOME on your W2's!

One of the surprises we'll find come next year, is what follows - - a little "surprise" that 99% of us had no idea was included in the "new and improved" healthcare legislation . . . the dupes, er, dopes, who backed this administration will be astonished!

Starting in 2011, (next year folks), your W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are given by the company.  It does not matter if that's a private concern or governmental body of some sort.  

If you're retired?  So what... your gross will go up by the amount of insurance you get.

You will be required to pay taxes on a large sum of money that you have never seen.  Take your tax form you just finished and see what $15,000 or $20,000 additional gross does to your tax debt.  That's what you'll pay next year.  

For many, it also puts you into a new higher bracket so it's even worse.



This is how the government is going to buy insurance for the15% that don't have insurance and it's only part of the tax increases..

Not believing this???  Here is a research of the summaries.....

On page 25 of 29: TITLE IX REVENUE PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec. 9001, as modified by sec. 10901) Sec.9002  "requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer sponsored group health coverage that is excludable from the employees gross income."



- Joan Pryde is the senior tax editor for the Kiplinger letters.
- Go to Kiplingers and read about 13 tax changes that could affect you..  Number 3 is what is above.

Dear Friend,

In the 2008 campaign, President Obama gave us all a hint of his socialist leanings when he promised to Joe the Plumber that he would "spread the wealth around." Last week, we found out that his policies and those of the Democrats are delivering on that promise...athough probably not in the way they expected.

The use of food stamps hit a record high in May 2010, according to the U.S. Department of Agriculture, with 40.8 million Americans receiving Supplemental Nutritional Assistance Program (SNAP) subsidies for food purchases. This is more than one-eighth of the population.

Worse, the USDA projects the number of Americans using food stamps will rise to 43.3 million in 2011.

President Obama, Nancy Pelosi and the Democrats are insisting that the economy has turned the corner and things are getting better. But how can the economy be getting better if the use of food stamps, a key metric in gauging the health of the American economy, is projected to increase over the next year?

A few weeks ago, in this newsletter, I wrote that the fall campaign should be framed around a choice between job killers and job creators. Sticking to that theme, another way to phrase that clear choice for voters is between policies that result in more Americans receiving food stamps and policies that result in more Americans receiving paychecks.

More Food Stamps vs. More Paychecks. That is the choice facing America this fall.

Going Backward

Unable to defend their dismal record on jobs or the big government, redistributionist policies that have made this the longest recession since the Great Depression, President Obama, Nancy Pelosi and the Democrats are now trying to scare Americans out of embracing the free market again, arguing that we don't want to go “backwards.”

President Obama even likened our economic situation to driving a car, saying “You want to go forward, what do you do? You put it in ‘D.' When you go backward, what do you do? You put it in ‘R.'”

There's a key problem with the President's strained analogy: The decision to drive forward or backwards depends on where you are parked. And right now, the United States appears parked on the edge of a cliff.

In last week's newsletter, I highlighted three charts as visual proof of the Obama-Pelosi-Reid economic failure. Here is another chart that should give us a clue as to what direction to drive the American economy if we want more paychecks instead of more food stamps as our future.

Food Stamp Use and New Jobs: The Gingrich Record vs. the Pelosi Record

The graph below depicts the number of Americans receiving food stamps during my term as Speaker versus Speaker Pelosi's term thus far. It also shows the change in unemployment rates during our two terms.

As you can see, Speaker Pelosi and I took office at a time when these two indicators were roughly similar: Food stamp use was at about the same level (around 26.5 million Americans) and there was only a 1% difference in the employment rate (5.6% in 1995 versus 4.6% in 2007).

The similarities end there. While the unemployment rate dropped significantly while I was Speaker to 4.2%, it has exploded under Speaker Pelosi, rising almost five percentage points to 9.5%. And while the use of food stamps dropped during my term as Speaker by 8 million Americans thanks to record job creation, it has increased under Speaker Pelosi by more than 14 million Americans.

In addition, when I was Speaker we turned a $107 billion deficit into a $125 billion surplus in four years. Speaker Pelosi's total lack of spending restraint has helped turn a $458 billion deficit into a $1.27 trillion deficit. And from 1995-1999, the stock market increased in value by 140%. Under Speaker Pelosi, the stock market has decreased in value by 14.6%.

This clear difference in results is due to the clear difference in economic policies pursued by Congress during our terms.

When I was Speaker, we kept spending increases down to an average of 2.9% a year, including entitlements. That is the lowest rate of increase since President Calvin Coolidge. Under Speaker Pelosi, the federal budget has increased by an average of 9% a year.

We also cut capital gains taxes to spur economic growth and investment. Under Speaker Pelosi, House Democrats have raised taxes as part of the healthcare bill, passed a job-killing energy tax, and want to let the 2003 tax cuts expire.

It is hard to find a better illustration of the difference between the pro-jobs, pro-investment, free market policies of conservatives and the big government, high spending, anti-market policies of the left. (Check out To Save America: Stopping Obama's Secular Socialist Machine for a more detailed analysis, including the results of the Kennedy and Reagan tax cuts).

So the next time President Obama and Speaker Pelosi try to deflect questions on their failure on jobs by intoning that we don't want to go “backwards” to lowering taxes and controlling spending, maybe someone should point out the track record and ask, “Why not?”

Your friend,



Newt Gingrich

The Washington Post babbled again about Obama inheriting a huge deficit from Bush. Amazingly enough,...... a lot of people swallow this nonsense. So once more, a short civics lesson.    
Budgets do not come from the White House. They come from Congress, and the party that controlled Congress since January 2007 is the Democratic Party. They controlled the budget process for FY 2008 and FY 2009, as well as FY 2010 and FY 2011. In that first year, they had to contend with George Bush, which caused them to compromise on spending, when Bush somewhat belatedly got tough on spending increases.
For FY 2009 though, Nancy Pelosi and Harry Reid bypassed George Bush entirely, passing continuing resolutions to keep government running until Barack Obama could take office. At that time, they passed a massive omnibus spending bill to complete the FY 2009 budgets. 
And where was Barack Obama during this time? He was a member of that very Congress that passed all of these massive spending bills, and he signed the omnibus bill as President to complete FY 2009. Let's remember what the deficits looked like during that period:    (below)

If the Democrats inherited any deficit, it was the FY 2007 deficit, the last of the Republican budgets.  That deficit was the lowest in five years, and the fourth straight decline in deficit spending. After that, Democrats in Congress took control of spending, and that includes Barack Obama, who voted for the budgets. If Obama inherited anything, he inherited it from himself.
In a nutshell, what Obama is saying is I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th.

There is no way this will be widely publicized.

David Hale
Coordinator, RockfordTeaParty
Regional Coordinator, Illinois Tea Party Patriots
www.rockfordteaparty.org

The real enemies of the American people are passivity and apathy. Our protests and rallies are meant to combat that. Americans have trusted their government who has assailed the sacred trust we handed them. Every generation must and has risen to speak to power or the abuse would have gone uncontested. Our opposition, will take the privilege we elected them to, beyond their limits unless we stand up and say We object. We're resisting, and this fall we will make them hear us at the polls during the non-violent, non-bloody revolution at the polls. It will be an uprising unprecedented if we just stay this course. Keep joining with the Tea Party to take our nation back!!! We are the Revolution. This is the Resistance.

3/1/10:  Illinoisans who visit this site and read it are all too familiar with the extreme debt the state is experiencing, seemingly a black hole from which there is little chance to escape.  Some, like me, wonder when the B word (bankruptcy) will enter into the equation.  Seemingly, not yet, as the dems still have control, and their solution is more and higher taxes as opposed to less spending.  Illinois is most certainly not the only state in dire straits.  In fact, compared to some, the canoe that Illinois is in is simply going through the rapids now, and has a ways to go before it reaches the waterfall to certain doom.  Not to worry, if the tax happy dems have their way, another paddler will have been added to that canoe. 

A good general overall overview of how the word "responsibility" (or lack thereof), both governmental and personal, can be found HERE in this well written piece....which, by the way, pretty much sums up the California situation in particular.  And, as seen HERE, California actually may pose a greater risk to any investors considering investing in anything tagged to California.  A pretty revealing article from a high power firm, J.P. Morgan.  And, California's problems don't end there.  It is obvious now that California pensions are continuing to push the state toward insolvency at an accelerated rate, as seen HERE. 

But California isn't alone in the deep weeds.  Pennsylvania's unemployment system is bankrupt, and this in a state which ranks in the top 10 in unemployment.  Pennsylvania's woes can be read in more detail HERE.  Florida's system is as well, as noted HERE.

Finally, it is not just Illinois, California, Florida, and Pennsylvania who are in deep weeks.  What has been shown above are just a couple of examples of specific issues in specific states.  Unfortunately, for all states, a crisis (and in many cases, the waterfall) looms nearer and closer to reality than many folks realize if the USS Budget (HERE) hits the iceberg many of it expect it to hit.  And when States set their budgets this coming year (most of them by July), they had better start to backpaddle their canoes to try to avoid the waterfall. The water will be cold.

3/2/10:  Update to above article:  In THIS ARTICLE you will find information on the 10 most debt ridden states...the next California.  Plus, there are some excellent links attached to the article.  

2/24/10:  I hope this is the last article on this page for the day.  Personally, I can't take a whole lot more of this kind of news.  A reading of the 5 posts below this one all adds to the validity of THIS ARTICLE.  It is no longer a matter of connecting the dots.  It is a matter of being aware of the stuff that will be hitting the proverbial fan.

And to add credence to that, THIS ARTICLE speaks of the 800 Pound Gorilla in D.C.

Again, the warning...keep your pantries full and your powder dry.

2/24/10:  This is one of those multiple link stories which will allow you to connect the dots.  Checking accounts are demand accounts, or so we have always thought.  Well, they still are, except at Citicorp.  Folks with Citicorp accounts are getting or have gotten a notice regarding their potential withdrawals which should cause quite a bit of alarm.  Read about it in THIS ARTICLE. 

Next, read THIS ARTICLE, which gives even more detail and background. 

Then, a real surprise comes along in THIS ARTICLE, we you will see that George Soros (the real string puller behind many of the puppets) is heavily involved among a group currently snatching up Citicorp shares.  Makes one wonder why doesn't it?

2/23/10:  It appears that California may well be bankrupt.  And, it appears, that there is pressure exerted NOT to talk about it as the Governors election starts to rev up.  There is a good summary in THIS ARTICLE of what is happening in the Golden State, and why.  All of which leads to the questions....what states will follow, and then what happens?  Certainly Wisconsin, most likely Florida, and Illinois are right on the edge.  Do states which become bankrupt become wards of the United States?  Hmmm.

2/5/10:  Following this brief comment are 3 links, each related to the budget and taxes.  The lame State of the Union message focused on boosting the economy (of which the middle working class comprises the bulk) and jobs creation.  Each of these links show how saying one thing isn't what really is.  The budget, as discussed in one link, will create problems as opposed to solving them, and the other two links talk about taxes planned which will likewise create issues among the working class.  Typical do as I say, not as I do. LINK HERE  LINK HERE and LINK HERE. 

2/1/10:  If you are young, you're going to pay.

            If you have kids and grandkids, they're going to pay.

            If you are old enough so you might go to glory in the next couple of years, you're lucky.

THIS ARTICLE offers an excellent overview (in graphs) of what the budget Obumbler just unveiled has in store...and it ain't pretty.  Hell, it's just money.

1/17/10:  THIS ARTICLE offers some very good insight into the root causes of the generations long problems our economy is facing today, and why Obama's plan for recovery will never work.  Interestingly, it also offers a solution that most likely would work.