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Year End Tax Issues

December 14th

As 2011 comes to a close, it is evident that this past year has had its fair share of fiscal ups and downs. One of the big topics of discussion has been the national debt and budget crisis and how it affects taxes.

The tax policy has been the center of much debate among politicians and whether possible changes would help alleviate our debt woes. Despite these discussions failing to lead to an agreement, some of the current tax cuts could come to end after the New Year.

Tax Reform

The issue that has many people concerned about the New Year is the payroll tax cut deadline. If no extension is granted, the payroll tax cuts currently offered will be terminated starting January 1st, 2012. The payroll tax cut has played a key role in sparking the job market by motivating employers and small business owners, which were eligible to lower payroll taxes from 6.2% to 4.2%. It is anticipated that Congress will extend this program for another year because it would be detrimental to raise takes on workers in a soft economy.

Another issue facing political leaders in the New Year is whether or not to raise taxes for certain income brackets. Democrats are looking to apply a 1.9% increase in taxes on those whose annual income exceeds $1,000,000. They are also hoping to repeal the Bush tax cuts for the wealthy. Meanwhile, some Republicans are pushing for a flat tax, or universal decrease in taxes so as to not cause a ripple of tax debt.  Further, Republicans want more tax deductions to help lower tax liabilities for all taxpayers and many businesses.

Currently, there are no plans for any changes to take effect by the year’s end. However, it is clear that some policy change is on the horizon, whether that means through tax increases or more cuts.

 

 
 
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