House Passes Legislation to Stop Impending Tax Hike, Make Tax Code Simpler

August 2, 2012 18:31 pm

by Bridget Cantrell · 26 comments

Congressmen Lynn Westmoreland and Tom Price separately issued press releases this evening on two pieces of legislation.  Update: I’m combining both in this post.

If you’ve met me (or stalked my FB page), you know that I’m blonde.  I don’t do my own taxes and have had the same accountant since I was 16; I’m still a fan of simpler tax code though.

As a commissioned salesperson, I’m taxed forty-effin-percent.  FORTY.  I’m not a particular fan of the Fair Tax because of the pre-bates, but I’m certainly not for being a single woman paying 40% of my paycheck to the government.  I need all of my money to buy groceries and stay in the kitchen making sammiches – barefooted.

The House passed two pieces of legislation concerning tax code: H.R. 6169 the Pathway to Job Creation through a Simpler, Fairer Tax Code Act, a pathway to comprehensive tax reforms in 2013, and H.R. 8 the Job Protection and Recession Prevention Act, which extends all of the 2001 and 2003 tax cuts for another year.

Now they’re on to the Senate.

 In response to the looming tax hike, Congressman Westmoreland will release a weekly column during the five weeks during the August District Work Period highlighting a different tax that could be increased and the impact that would have on American families and businesses. He encourages everyone to tune in to his website every Thursday over the next five weeks to learn more.

You can read both press releases below the fold.

From Rep Lynn Westmoreland:

WASHINGTON, D.C. – This week, the House passed two pieces of legislation to tackle some of the problems with our tax code. H.R. 6169 the Pathway to Job Creation through a Simpler, Fairer Tax Code Act would clear a pathway for comprehensive tax reforms in 2013. In the mean time, the House passed H.R. 8 the Job Protection and Recession Prevention Act, which extends all of the 2001 and 2003 tax cuts for another year. That way, the American people do not suffer with higher taxes while Congress works on a plan to truly reform our tax code. Congressman Westmoreland supported both bills.

“Our tax code has gotten so complex that the average person can’t file their own taxes without help,” stated Westmoreland. “And it’s only getting worse. We have got to do something to simplify our tax code to make it easier to understand and to make it fairer for all Americans. That’s why I have been a long-time supporter of the Fair Tax. It is the best way to eliminate a lot of the confusing tax code that we have now and replacing it with a tax that ensures everyone contributes fairly. And now that we have passed H.R. 6169, it paves the way for the House to have a real discussion about the Fair Tax and hopefully finally pass this popular bill.”

If Congress doesn’t act, every American who pays income taxes will see a dramatic jump in their overall tax burden. For example, a family of four making $50,000 a year could see their tax burden jump to five times their current rate. The American people will not just see an increase in their income tax. Dividend taxes, capital gains taxes, and other taxes would be increased – some to two and three times their current rate – as well as income taxes.

“It would be absolutely irresponsible to raise taxes on any Americans at a time when our economy is still struggling,” stated Westmoreland. “But you don’t just have to take my word for it. Prominent Democrats are joining House Republicans in calling for a full extension of these tax cuts. That’s because they agree with Republicans that when more than 20 million Americans are currently unemployed or underemployed and the economy is still trying to recover, raising taxes on families and small businesses will only prolong our problems. That’s why I cannot support legislation that does not extend all of the 2001 and 2003 tax rates.”

Both bills passed the House with bipartisan support. Congressman Westmoreland strongly encourages the Senate to pass these two pieces of legislation. In addition, House Republican Leadership has announced the House would return from their August District Work Period if the Senate followed the House’s lead and passed legislation to replace the sequester requirements that are threatening our national security and to fully extend the 2001 and 2003 tax cuts.

In response to the looming tax hike, Congressman Westmoreland will release a weekly column during the five weeks during the August District Work Period highlighting a different tax that could be increased and the impact that would have on American families and businesses. He encourages everyone to tune in to his website every Thursday over the next five weeks to learn more.

From Rep Tom Price:

Washington, D.C. – House Republican Policy Committee Chairman Tom Price, M.D. (R-GA) issued the following statement following passage of H.R. 6169, the Pathway to Job Creation through a Simpler, Fairer Tax Code Act of 2012, in the House of Representatives:

“House Republicans are putting forth a plan that sets out a clear vision and real deadlines for comprehensive tax reform. The current system is terribly complex and needlessly burdensome for families and job creators. It is past time we take action to transform our outdated and cumbersome tax code to become simpler, fairer and more competitive.

“Our goal is to achieve a fundamental reform of our tax code that lowers rates, broadens the base and closes loopholes. That means Americans will take home more of their hard-earned money, so that they may spend, save and invest as they wish. It means reducing America’s corporate tax rate, currently the highest in the industrial world, so we incentivize job creators to return to the U.S. and encourage new ones to start doing business with us. Under the reform we envision, Washington will no longer be able exploit our tax code to pick winners and losers or reward special interests.

“At a time when our economy remains utterly stalled and millions of our friends and neighbors are out of work, House Republicans are providing a positive pathway to reform and greater economic freedom and opportunity.”

Chairman Price is a member of the House Committee on Ways and Means, as well as the House Committee on the Budget. Last week, The Hill published his guest editorial on the need for comprehensive tax reform and House Republicans’ unwillingness to increase taxes on American families and job creators.

 

 

John Konop August 2, 2012 at 8:35 pm

Bridget I do hope you are maxing out your 401k to lower your tax burden and increase savings.

As far as taxes we should just elimante all wrote offs. I would propose a hybrid flat tax on income and a national sales tax. And we could have a few leves on income, but nothing hire than 15 percent. And if you added a sales tax at about 9 percent I think we would balance the budget, and end the government picking winners and losers via lobbyist. The balance budget would still take work on Medicare, defense and SS the three big issues.

Bridget August 2, 2012 at 9:22 pm

I’m with a new company and can’t start contributing for another month, but yeah – that’s been a standard practice of mine since entering Corporate America.

I lean hybrid too.

John Konop August 2, 2012 at 9:35 pm

I am glad to hear that you are a fiscal conservative with your own money!

Dave Bearse August 2, 2012 at 10:15 pm

At a 40% rate, you’re either choose to “buy groceries and stay in the kitchen making sammiches – barefooted.” Or you need a new accountant.

John Konop August 3, 2012 at 7:39 am

Dave I do not think Bridget said she pays at a 40 percent federal rate. I understood her post being about all taxes federal, state, FICA……I do understand her frustration…….. Yet our country leadership has spent our money in a very irresponsable way agree or not with the policy from Medicare pert d, middle east wars, war on drugs, No Child Left Behind, Highway bills with bridges to nowhere, Farm bills…..

We are facing crumbling infastructure that needs instant repaire for our economy, and even on a local level did we get a serious bill or political BS? We are facing a healthcare crisis that will bk our country, and when any side talks about cuts it becomes about killing grandma or death panels. Trust me the lack adult conversation and solutions are drowned out by political BS while many of us just keep paying our taxes.

I am not speaking for Bridget, but for reading her comments I suspect she is as frustrated as many of us. And as our country remains in a political deadlock, with the BS flowing, it is hard to stay fired up paying taxes knowing the money is being thrown away on political favors, over solving anything.

griftdrift August 3, 2012 at 9:03 am

Bridget must have a pretty good income. I paid 33% last year, everything included, and I’m nowhere near the bottom tax bracket.

Bridget August 3, 2012 at 9:55 am

Commissions are taxed differently than base salary.

Bridget August 3, 2012 at 9:55 am

I’m poor but happy :)

Dave Bearse August 3, 2012 at 10:13 am

John, FICA and Medicare are currently at about 13%, Georgia’s income tax is 6%. The conclusion is that her overall federal tax after deductions is 21%. I figure that places her gross inccome approaching the $70,000 break point between the 25% and 28% brackets, considering health care, 401(k)s and other deductions.

Dave Bearse August 3, 2012 at 10:37 am

Ouch! Two mistakes in the foregoing. On one hand I included Georgia’s 6% income tax in the 13%, and thus double counted it, On the other the $70,000 break point is for married filing jointly. It’s $35,000 for single.

Her effective rate is overall federal tax after deductions is thus 27% instead of 21%. She’s probably beyond the top limit of the 28% tax bracket, which ends at $84,000 for singles.

Three Jack August 3, 2012 at 11:03 am

“irresponsible spending….Medicare pert d, middle east wars, war on drugs, No Child Left Behind, Highway bills with bridges to nowhere, Farm bills…..”

Amazing! You mention irresponsible spending yet leave out the the most irresponsible, un-constitutional wasteful expenditures like medicaid, food stamps and all the other redistribution programs that comprise a very significant portion of the annual government budget. 40% taxation will be the low end if we don’t end the decades old practice of taking from producers to fund freeloaders.

Ken August 2, 2012 at 11:32 pm

Our federal tax code is a compilation of over 40,000 pages of the best examples of cronyism in existence. We should have a tax code that allows a high school graduate with a normal IQ to do his/her own taxes.

No one can say with certainty that the amount of taxes paid was the exact correct amount. No one. If you don’t believe me, ask Tim Geithner.

Jackster August 3, 2012 at 9:58 am

@Ken – You are correct sir… However, there is agreement from the IRS that paying NO taxes (no witholding, FICA, Medicare) is the exact INCORRECT amount.

CobbGOPer August 3, 2012 at 9:55 am

Wait, Bridget, you mean you don’t get subsidized by your dates? If you don’t have a regular stream of men contributing to you financially, you may be doing it wrong…

That’s why I avoid dating right now – need to save money. Cause y’all sure don’t pay ;-)

Jackster August 3, 2012 at 9:57 am

man, where’s that modify feature when you need it….

CobbGOPer August 3, 2012 at 10:57 am

Ignore women – Acquire Currency

It’s a winning formula.

Calypso August 3, 2012 at 11:46 am

And you’re certain that it is you who is doing the avoiding and the ignoring? ;)

tomfromdecatur August 3, 2012 at 9:58 am

Forty per cent! As stated by Ken, no one can really tell you what their taxes are or certainly their bracket or actual tax rate.

Why? Most everyone gets exemptions, deductions and write offs including a salesperson (meals, travel, continuing education, lodging, etc.).

You think you would know your federal taxes, for instance, after you have calculated your taxable income (Line 43 of 2011 1040) but no, you then have to figure your altenatuive minimum tax to see what you may have to pay.

Done yet? heck no. You have to figure other taxes (line 56 – 60) to get your “Total Tax (line 61).

Are we there yet? Not yet! You then get some credits for excess Social Security Tax with held, for instance (if anyone ever switched job during the year, this could happen).

Now? No, becasue we now know the amount of the taxes paid, not the percentage. So, when someone says they are paying 40-something per cent in tax, they need to tell you on what. Here’s a “Simple example”:
1. The tax on taxable income (line 43) is a blend of graduated rates so that even if a single person made $174,400 of taxable income (the top taxable income in the 28% tax bracket for a single person in 2011), the taxes would be $41,329 or 23.7% of the $174,400, not 28% (that is only the bracket for some of the income).
2. If you add the employee side of Social Security for 2011 (4.2% on the first $106,800 of tacable income or $4,485.60) and a full 6% for state (not counting it is a blended rate or other factors that might adjust the “taxable income” number or $10,464) plus Medicare tax of 1.45% on the taxable income or $2,528.80) these total taxes on the taxable income equal $59,108 or total percentage rate on the taxable income of about 33.9%.
3. If you add the employer side of the Social security and Medicare tax tax (self employed person) of 6.2% on the $106,800 ($6,621.60) plus 1.45% on all income (an additional amount of $2,528.80) for total of these taxes of $68,258.40 the total taxes paid now equal 39.1% based just on the taxable income from the 1040.

I am sure there are dozens of ways and variables that come into play and we do not know the persons “total income” (Line 22) [Remember line 22 is before fourteen “adjustments to income” such as contributions to retirement plans, deductions for self employment tax (employee side of Social Security] to get to the person’s “adjusted gross income”.

So, is the 40% quoted in the post on the
A. “gross income” of the person (if they are a “schedule C” self employed person they have been able to take a slew of dedutions there before they put their “business income” on line 12 of the 1040 so their gross income would be mcuh higher as they got to take all these deducitons),
B. on thier “adjusted income” (line 37) or
C. “total income” (line 43)?

The effective tax rate would be much less for anything other than the “taxable income”.

Ken, you are sooooo right.

Scott65 August 3, 2012 at 10:35 am

…and here is a related nugget I stumbled upon this morning. It hits the pocketbook of everyone in N. Georgia

http://stopthecap.com/2012/08/01/att-and-georgia-cable-lobby-try-to-force-independent-telcos-to-raise-rates/

candlerpark August 3, 2012 at 10:43 pm

An important distinction- as a 100% commissioned person myself, taxes are withheld from you at a higher ‘bonus’ rate (unless you take the time to adjust your w-9 form) , but that is not the same thing as being taxed 40%. You pay the same rate in taxes whether it is from commission, from wages, from net business income of from short term cap gains. Your employer may withhold taxes at different rates bit the IRS makes no such distinction come april 15. Like you, my withholding was through the roof , but I have actually paid a negligible amount in federal tax in recent years due to deductions, etc . . . . Do not make the mistake of confusing taxes taken out of your paycheck with taxes actually due on your 1040. If you are having that much deducted then adjust your w-9. You only pay FICA on the first 110k in income as well, so you may cap out on that well before the year is over assuming you are good at what you do.

Dave Bearse August 4, 2012 at 2:21 pm

Thanks for that information, candlepark. Bridget’s either doing very well as she chooses to make sandwiches barefoot in the kitchen (while implying she’s struggling financially), is cluseless about her own finances, or (as I think most likely) seeking to deliberately mislead.

Bridget August 4, 2012 at 2:29 pm

Ah, Dave – I’m too open about my life to deliberately mislead. Why can’t I enjoy a good paycheck AND enjoy making sammiches? Ehh, it’s not the first time I’ve been called clueless – probably not the last.

Happy Saturday, sweet cheeks.

Dave Bearse August 5, 2012 at 1:20 pm

You enjoying a good paycheck and choosing to make sammiches while barefoot was a point of mine from the get-go.

saltycracker August 5, 2012 at 1:15 pm

40% ? That calls for some serious counseling to review the possibilities to at the least, pay less of a percentage than the multi-millionaire next door.

There is a 100% chance the current bunch will not agree to a clean, clear tax code overhaul. Flat tax. fair tax, same ole same…….just make up your mind so we can study the winners and loosers categories and adjust accordingly.

Harry August 5, 2012 at 2:46 pm
Harry August 5, 2012 at 3:08 pm

Comments on this entry are closed.