As we approach the end of 2012, you’ve likely heard lots of talk among politicians and the media about the impending “fiscal cliff.” This term refers to a combination of tax increases and spending cuts that are slated to take effect in January 2013 if Congress fails to take action. But how will this affect you?
Payroll Tax – 2013 will bring the expiration of the payroll tax cut enacted by Congress in 2011. Starting next year, the current employee payroll tax rate of 4.2 percent will go back to 6.2 percent.
Ninety years ago — in 1921 — federal income-tax policies reached an absurdity that many people today seem to want to repeat. Those who believe in high taxes on “the rich” got their way. The tax rate on people in the top income bracket was 73 percent in 1921. On the other hand, the rich also got their way: They didn’t actually pay those taxes.
The number of people with taxable incomes of $300,000 a year or more — equivalent to far more than $1 million in today’s money — declined from over 1,000 people in 1916 to fewer than 300 in 1921. Were the rich all going broke?
It might look that way. More than four-fifths of the total taxable income earned by people making $300,000 a year and up vanished into thin air. So did the tax revenues that the government hoped to collect with high tax rates on the top incomes.
What happened was no mystery……………………………