2011 Tax Hike: Progressive Style

Tax Relief for the Middle Class (whatever middle class means)

by: Larry Walker, Jr.

With the imminent expiration of the Bush tax cuts, Mr. Obama and his progressive minions fathom that its termination doesn’t really constitute a tax increase. It’s not a tax hike in their minds, it’s just the conclusion of another failed Bush policy which helped contribute to the ‘great recession’. So in 2011, when your taxes climb, and they will advance across the board (as shown here), you shouldn’t blame Obama. Paying a little bit more shouldn’t be a problem now, because we are far better off today under Obama’s economic stimulus, than we were in all of 2001 through 2008. Right?

Leave it to Barack H. Obama, II to have an answer for every problem facing Americans today.

You got problems? Obama’s got solutions.

Problem: You are upside down on your mortgage and can’t see the light of day.

Solution: That’s not my fault, it’s Bush’s fault. You’re still getting a tax hike.


Problem: You are still trying to work out a loan modification to try to save your home.

Solution: Hopefully that will work out, but right now I need to raise your taxes.


Problem: You recently lost your home and are struggling to make ends meet.

Solution: So sorry, but I gotta raise your taxes too.


Problem: You’re on 99 weeks of extended unemployment benefits due to a rotten economy and the failed stimulus program.

Solution: Be sure to have taxes taken out of it, because you’re getting a tax hike too.


Problem: You haven’t saved enough for retirement and you are trying to find a way to save more.

Solution: Well, if you have money to save, then you can pay more taxes. You’re definitely getting a tax hike.


Problem: Your business suffered massive losses over the last two years and you’re still paying off loans and credit lines, and trying to dig your way out of a hole.

Solution: We all have to do our fair share. A tax hike for you.


Problem: The Gulf of Mexico oil spill completely destroyed your livelihood and you don’t know what you’re going to do.

Solution: That’s BP’s fault, not mine. Set some of that BP money aside, because you’re getting a tax hike too.


Problem: You’re already working two jobs and still living paycheck to paycheck.

Solution: Try to cut back on expenses, or get a third job, because you’re getting a tax hike too.


Problem: You’re one of the 1.4 million who filed for bankruptcy last year.

Solution: Now that all of your debts are out of the way, paying more taxes should not be a problem. Tax hike!


Problem: You’re one of the 40 million Americans currently on food stamps.

Solution: Since there will be 3 million more on food stamps next year, we have to raise taxes on everyone else to help out folks like you. And if you earn enough income to be taxed in the near future, don’t you worry, you’re getting a tax hike too.


Problem: You’ve paid taxes your whole life, and you’re worried that the reinstatement of the 55% estate tax in 2011 will force the sale of your family business.

Solution: If you leave an estate worth over $1 million, your estate will be forking over the 55%. But, since you’ll be dead by that time you shouldn’t worry about it so much. When we spread the wealth around it’s good for everybody.


Problem: You’re worried about how the known (and hidden) taxes in Obamacare, the Stimulus Act and other stealth legislation will affect you on top of the 2011 tax increase.

Solution: Don’t worry about it. You’ll find out when we do. Once we finally finish reading and interpreting all of this mess, … I mean reform, we’ll let you know.

Here’s what our current tax rate schedule looks like as compared to what the 2011 rates may look like (assuming no adjustment for inflation):

2010 vs. 2011 Tax Rates

Obama and the progressives want to somehow let the Bush tax cuts expire for anyone making over $200,000 per year, but it’s not clear whether or not tax rates for those below that amount will revert to pre-2001 levels. Since there is no cut-off at $200,000 per year under our current tax rate schedule, Obama will need to invent a new tax rate schedule. Here’s what an Obama tax rate schedule might look like:

Obama's Tax Rate Schedule?

Under current tax law, those making over $373,650 a year are considered wealthy, but from now on, if you make over $200,000 a year (formerly $250,000) you’re rich, because Obama says so.

Unusual uncertainty remains unusually uncertain.

It will be interesting to see how Congress resolves this. If Congress fails to take action, taxes will rise across the board, by default. Waiting until after the November elections is not an option.

2011 Tax Increase : A Reality Check

Income Tax Reality Check

Compiled by: Larry Walker, Jr.

“If you make less than $250,000, you will not see your taxes increase by one dime.” ~ B. H. Obama

Left-wing pundits are claiming that the Bush tax cuts were for the wealthy, which is simply not true. Next year when the 10% tax bracket disappears, and tax rates return to pre-2001 levels, will represent an across the board tax increase affecting every American. In addition, the child tax credit will return from $1,000 (per child under age 17) to $500 representing a tax increase for everyone who has children, not the wealthy. The fact is that the Bush tax cuts applied to every American at every level of income, and when they expire taxes will rise from the bottom up.

In 2011, if you make over a nickel in taxable income, your taxes will increase a minimum of 9%, and as much as 50%. Since our tax rates are progressive, taxes on the first $16,750 for couples ($8,375 for singles) will increase by 50%. Taxpayers who make under $8,375 in taxable income will see the largest tax increase at 50%. Middle income earners will see their taxes rise by no less than 9%. The contention that the Bush tax cuts only affected the wealthy is a bald-faced lie. Similarly, the contention that Obama’s tax increases will only affect the wealthy is nothing but a fairy tale. Americans are educated and can comprehend income tax tables. You can choose to believe whatever you want, but reality should not be optional.

2010 Tax Brackets

Nickel over at fivecentnickel.com has projected how the 2011 income tax brackets may look. The commentary below is attributed to Nickel. I have retouched his 2011 table (below), and added the 2010 table (above) for comparison.

Income tax bracket changes for 2011 – In case you weren’t aware, the Bush tax cuts of 2001 and 2003 are set to expire at the end of 2010. Thus, if Congress doesn’t act, the relatively low income tax rates that we’ve been enjoying (hah! enjoying?) will soon be a thing of the past. They will be replaced by the pre-2001 tax brackets.

In other words, the 10%, 15%, 25%, 28%, 33% and 35% tax brackets that we’ve grown accustomed to will be replaced by 15%, 28%, 31%, 36%, and 39.6% brackets. It’s hard to say exactly where the income cutoffs will lie, but if we base the numbers on the 2010 income tax brackets and add 3% for inflation, the 2011 tax brackets might look something like this:

2011 Projected Tax Brackets

Capital gains tax changes in 2011 – Beyond the increased federal income tax brackets, the capital gains tax rates will also be changing (and not for the better). The top rate for long-term capital gains will be rising from 15% to 20%, and the 0% rate for those in the lowest tax brackets will be replaced by a 10% long-term capital gains rate.

Why worry about 2011 income tax changes? – Since the 2011 tax year is so far off, you might be wondering why we’re even talking about it right now. Well, as I noted above, the time to be planning for things like this is right now – before the changes go into effect as these potential income tax rates have the potential to take a big bite out of your savings account.

What sort of planning should you be doing? I can think of several things off the top of my head. For starters, if you’re in a position to accelerate income from 2011 into 2010, you might want to do so. In many cases this is easier said than done, but it’s worth exploring if you’d like to shield your income from the potentially higher rates.

Also, if you’re anything like me, you may wait until the end of the year to make your charitable donations. If so, then by waiting just a few more days (until January 1, 2011) to write that check, you could net a substantial tax savings. While you’d have to wait longer to claim the deduction, it might be worth it.

Similarly, if you anticipate selling investments to generate cash during 2011, you might consider moving that up to the end of 2010 to get in on the (presumably) lower capital gains tax rates.

Reference: http://www.fivecentnickel.com/2010/02/15/2011-federal-income-tax-brackets-irs-income-tax-rates/