November 30, 2012 Britain’s Missing Millionaires A funny thing happened on the way to soaking the rich. They don’t stick around for the bath. In Britain, the number of taxpayers declaring 1 million pounds a year in income fell in fiscal year 2010 - 2011 by more than 60% from the year before. That was the year millionaires became liable for the 50% income tax rate that Labor introduced in its final days up from the previous 40% rate. Something for the U.S. to remember as President Obama pretends he can fill a $1 trillion budget hole with tax hikes on millionaires and billionaires. Wall Street Journal 12/3/12 p. A16. Forget The Election Year Rhetoric, These Are The Official Numbers! New IRS statistics show the tax burden on taxpayers in 2010: § Top 1% of filers paid 37.4% of all federal income taxes up from 36.3%. AGI to be in 1% was $369,691 (definitely not millionaires and billionaires if they live in the New York area). § Top 5% paid 59.1% of all federal income taxes. AGI needed to be $161,579. (This group would include married couples where one person is a NYC Police Officer and one who is a NYC Correction Officer). § Top 10% paid 70.6% of all federal income taxes. AGI needed to be $116,623. § Bottom 50% of filers paid 2.36% of all federal income taxes. This means that one half of all American taxpayers have no skin in the game. This is very close to Romney’s 47% remark. Maybe he got his facts from the U.S. government! Kiplinger Tax Letter 11/21/12 vol. 87, #24 Do you think the Top 1% and the Bottom 50% are paying their fair share of the tax burden? Briefly, Politics Aside In summary, the Bush tax cuts removed a substantial amount of Americans from the tax rolls with the result that the higher income taxpayers are paying a greater percentage (if not total) of the federal income taxes. The Bush tax cuts created a substantial portion of the American public who has no skin in the game. If the Bush tax cuts expire, then we all will pay more taxes and those taxpayers who were removed from the tax rolls 10 years ago will return as part of the taxpaying public. Our average client, who is a New York City employee, saved $3,000 - $5,000 per year from the Bush tax cuts. Approximately $46 billion will be obtained from the New York economy if the cuts expire and the New York/New Jersey economies will suffer as a result. If President Obama has his way, those absent taxpayers will remain absent, and those still pulling the wagon will be made to pull a little harder. After all, the top 2% who Obama refers to are paying approximately 50% of all federal taxes. Curiously, the blue states will be hit harder than the red states. Speaker Boehner is fighting to protect the blue states who obviously agreed with Obama’s position since they voted for him. Higher FUTA Taxes The 5.4% credit against FUTA tax is reduced for companies in states that have not repaid the loan from the federal unemployment fund. Stuck with a .6% credit cutback which means up to $42 more tax per employee are companies in 14 states: NJ, NY, CT, AR, CA, FL, GA, KY, MO, NV, NC, OH, RI. Kiplinger Tax Letter 11/21/12 vol. 87, #24. Victims of Hurricane Sandy can tap qualified employer plans more freely. IRS is easing the hardship payout rules so storm victims can take out funds for living costs and plans will be allowed to speed up payment. Payouts are still taxed, and the 10% penalty may apply. Plan loans can also be made on an expedited basis. Kiplinger Tax Letter 11/21/12 vol. 87, #24. Many Taxpayers Will Not Be Able To File Early because of Congress' delay in finalizing the 2012 tax rules. Because tax writers are not expected to act until mid to late December to reinstate a set of tax provisions that expired after 2011. This affects itemizers and anyone deducting teaching supplies or college tuition. Kiplinger Tax Letter 11/21/12 vol. 87, #24. Detroit Is Again Poised To Go Bankrupt The municipal unions again voted not to go along with Mayor Dave Bing’s reforms. The unions are hoping Michigan will continue to bail out Detroit or that the unions will get a better deal in Chapter 9 bankruptcy from the federal judge. As always, if you have any questions about these or any other matters, do not hesitate to call us. Remember, We’re Here For You!