Sunday, June 14, 2009

How Taxes are Increasing for the Not-So-Rich

A popular tax strategy is to increase taxes for only the rich. Surprise, it seems that taxes are going up for those that are not-so-rich. Here are the one's that are affecting me already or could affect me in the future:
  • Property tax - Like many others, I was shocked to find that the assessed value of my home had increased from the 2005 valuation. Although it was only 4%, I immediately called up the tax assessor office and complained. "Haven't you been reading the papers about the real estate crash, " I asked half jokingly. They responded that downward adjustments had been made to reflect the recent real estate situation and added that homes in parts of the county did get their values lowered. Just not mine :-(

    There is no way I'm letting the value of our home be inflated to maintain the tax base. So I filed an appeal to contest our home valuation.

  • Sales tax - This includes specific and general sales taxes. For example, New York Governor David Patterson, has proposed a 18% soda pop tax that would deliver about 1/2 billion in tax revenue per year, under the guise of improving public health.Also, I wouldn't be surprised if the gasoline tax was increased, as a way to curb use of fuel inefficient vehicles. There is also discussion of a national value added tax (VAT), which is a consumption tax, in addition to the federal, state and local income taxes.

  • Benefits tax - Benefits from employer paid insurance premiums to company provided cell phones are being looked at by the government as a taxable. While taxing benefits can enacted above certain incomes, it seems that it will eventually affect the not-so-rich also.

  • Self employment tax - With unemployment rising, some people are choosing to become self employed or independent contractors. For these situations, a self employment tax needs to paid, which is equal to twice the Social Security tax (6.2%)and Medicare tax (1.45%) since both the employee and employer part must be paid by the taxpayer. Unfortunately, there is no exemptions allowed for the not-so-rich.
  • As usual, it looks like everyone will have the burden of more taxes, in spite of the recently popular belief of taxing only the rich.

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    This is not financial, tax or policy advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    1 comment:

    terry said...

    I have no idea how assessments and property taxes work in your area, but a three-year moving average is used in many places to calculate property taxes.

    Assessments for the most recent three years are averaged and then the tax rate is applied to this average.

    The reasoning for this was that property values and assessments tend to rise over time, and using a moving average would slightly delay the rise in taxes, as the moving average would generally lag behind current values.

    e.g. Year 1 $100K, Year 2 $110K, Year 3 $120K - your current assessment would be $120K but the property taxes would be based on the moving average of $110K.

    The downside is that in a falling real estate market, the moving average does not drop as fast as does your current property value or your assessment, making your property taxes seem 'stuck' at some unreasonably high level.