Taxageddon, by Sampradaya Sun

Taxageddon

BY: SUN STAFF

Jun 15, 2012 — CANADA (SUN) — In May 2008, the Sun ran its first report of the unfolding economic disaster befalling the world, in an article entitled "Global Meltdown". We followed it several months later with another round of dire predictions, in "Temple Management in a Meltdown World". In that article we predicted what the scenario would look like if the government bailed out the banks (which they did), or refused to bail them out. In retrospect, every item of the former prediction came true, and about half the items in the latter scenario also came to pass.

Our purpose in publishing those articles was to try and call to the attention of the devotee community, and particularly the temple managers, some of the financial issues that might become great challenges for our temples. Although the economic impact of the 2008 meltdown didn't result in visibly dire consequences for the general public to the degree it might have, we have watched the steady debilitation of the world economy since then, and the slide has not stopped.

We felt it was now time to revisit the issue in the Sun, because as the last half of 2012 unfolds, the United States -- like much of Europe -- seems poised to drop off the cliff that first came into view during the 2008 meltdown.

The U.S. Treasury is now letting on that the nation faces a $100 trillion dollar gap, which has been growing exponentially over the last four years as Congress kicks the can further and further down the road instead of fixing what's broken. And beginning in January 2013, the government is poised to take the very same action that President Hoover did, plunging America into the Great Depression.

As Srila Prabhupada stated in his purport to Srimad-Bhagavatam 3.22.32:

"It is not that the miseries of the material world completely vanish when one takes to Krsna consciousness, but for one who is Krsna conscious the miseries of material existence have no effect. We cannot stop the miseries of the material atmosphere, but Krsna consciousness is the antiseptic method to protect us from being affected by the miseries of material existence. For a Krsna conscious person, both living in heaven and living in hell are equal."

This is the standard devotees seek to attain, engaging in simple living, high thinking that helps to safekeep us from getting ensnared in the mundane. At the same time, good stewardship of Srila Prabhupada's ISKCON assets, temples and preaching programs requires being informed of social dynamics likely to affect the preaching. It is in this mood that we present the following information.

Beginning on January 1, 2013, there are four huge waves of tax increases coming for U.S. citizens, with the potential to seriously debilitate the economy. These tax increases are unprecedented, and represent the 'dropping of the second shoe', the first of which landed with a thud in mid-2008. But strangely enough, very few realize that this wall of steep taxes is about to collide what what remains of the U.S. economy.

These tax increases will further decimate the middle class, thus increasing the ranks of the working poor. We can expect more and more pressure to be put on diminishing social safety net resources, thereby increasing pressure on local temple communities to help support those being slowly overtaken by poverty -- even in the devotee community, what to speak of the general public.

Among the ranks of the upper middle class and the wealthy, many of the incentives that for years have driven charitable contributions are going to disappear in 2013. This will undoubtedly make it more difficult to raise money for large temple projects, and it will likely result in overall decreases in regular contributions.

Starting January 1st and progressing through 2013, these four waves of tax increases will hit individuals, couples, families with children, working investors, seniors and retirees, and businesses that employ people. All will be hit -- and hit hard -- by this wave of tax burdens. Among members of the financial community, it's now known as "Taxageddon", and it's coming to every town and village in the United States. If you're interested in a preview, just stay tuned to the ongoing saga in Greece. The similarities are frighteningly close.

The First Wave -- repeal of the Bush tax cuts

the Bush 2001/2003 tax relief act expires

the 10% tax bracket disappears and the lowest tax bracket moves to 15%, hitting the lower income groups

the top bracket rate moves from 35% to 39.6%, hitting everyone else

the marriage penalty comes back, costing the average family $2,000 to $3,000

the Child Tax Credit will be cut in half, from $1,000 to $500/child

the middle class Death Tax comes back, with the bracket going up from 35% to 55% (a 60% increase), and the exemption falling from $5 million down to $1 million (an 80% decrease)

Capital Gains Taxes are rising from 15% to 23.8%

taxes on dividends are going up from 15% to 43.4%.

Social Security taxes will go up approx. 2% across the board

The Second Wave -- Obama's healthcare tax

In about a week from now, the Supreme Court decision is coming on Obamacare. That decision could (but isn't generally expected to) eliminate some of the following 2013 tax hikes:

Medicare payroll taxes going up .09%

the threshold rises from 7% to 10% of adjusted gross income for those with itemized medical expenses

an additional 3.8% surtax on net rental income for those who own rental income property

a 3.8% increase in annuity tax for those receiving an annuity or a pension annuity payout

likewise, a 3.8% increase in taxes on interest earned on bank CD's and bonds

The Third Wave -- raising of alternative minimum tax and employer tax hikes

Starting January 2013, 31 million American tax filers will find lots of nasty surprises in their IRS package. A key factor here is a change in the way the alternative minimum tax formulas work. This will affect how charitable contributions serve to reduce taxable income, and will result in much less incentive for giving to charities. In addition:

small business write-off's for equipment purchases (which were 50%) are going away

R&D offsets are going away

tax benefits for education & teaching being reduced, and company deductions for providing educational benefits to employees are disappearing

there will be no more deduction for tuitions and fees

student loan interest deductions will be disallowed for millions of Americans

charitable contributions from IRA's will no longer be allowed. Currently, a retired person can contribute up to $100,000 directly from their IRA to a charity, and this counts toward their required minimum distribution -- in January 2013, this incentive goes away.

The Fourth Wave -- expiring Federal tax deductions

There are 46 pages of various deductions for businesses and individuals that are expiring over the next 3 years:

there are 5 pages of deductions expiring at the end of 2012

there are another 4 full pages of deductions expiring over 2013

The net result of this 4th wave is already being felt: corporations are sitting tight, not expanding and investing, thus the economy is becoming increasingly depressed.

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Taxageddon, by Sampradaya Sun

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