Washington Argues Over Tax Hikes on Wealthy
D.C. Tax Warfare Heats Up as “Fiscal Cliff” Nears
Tax cuts are at the center of attention in Washington again as president Barack Obama and Democrats hope to raise income taxes on the wealthy.
It’s a debate that surges every so often as adamant Republicans refuse to let any tax rates increase. But as the political warfare heats up, the nuances of the president’s tax plan are sure to get lost in all the political rhetoric.
Obama’s tax plan maintains the Bush tax cuts for the first $250,000 of one’s income. Income past that amount will get taxed at a higher rate. A joint congressional tax committee estimated that three percent of businesses would be impacted.
Obama will likely portray Republicans as supporters of lower taxes for the wealthiest two percent, while Republicans will likely argue that nobody should have their taxes raised.
But if D.C. politicians don’t make a deal on taxes and spending, the US economy may fall into what some are calling the “fiscal cliff,” a combination of roughly $560 billion in higher taxes and spending cuts.
That may spur the IRS to pursue tax debt at a more aggressive pace, and step up collection efforts against those who can’t pay their taxes.
Democrats argue that the possible spending cuts in the nation’s discretionary spending, which falls outside of entitlement spending like Social Security and Medicare, would negatively impact working families. Republicans, who generally favor higher military spending, argue that cuts in that area would harm national security.
Republicans also argue that cuts to military spending should be offset with cuts to discretionary spending, but Democrats aren’t having any of that. So, a stalemate may persist past the 2012 presidential election with taxes and spending the center of debate.
However Washington politicians resolve the fiscal cliff issue, tax collection will play a big part of it. The IRS will surely pay attention and refocus its efforts at collecting back tax debt.
But working with a tax professional can help you manage your taxes and get yourself out of the IRS’s crosshairs.