It goes without saying that when you come across a man with one leg, it doesn’t make much sense to take a sledgehammer to his kneecap.
Yet that is exactly what is about to happen on December 31st at midnight.
When the clock strikes twelve, Uncle Sam will be at it again, doing his best to separate you from your money.
Without a renewed lease on life, the Bush tax cuts will be gone forever — costing taxpayers $115 billion in 2011 and $2.6 trillion through 2020, according to the Congressional Budget Office.
It’s a blow the economy can ill-afford at the moment as the government works to squeeze more blood from the barren stone, leaving consumers with an even smaller slice of the pie and less — not more — to stare down the worst economy since the Great Depression…
Honey, I’ve wrecked the car
But in a way, that’s not even the worst part of the whole thing.
What really bugs me is this: The same government that is spending us into oblivion will use it as a pretense for making us pay more.
“We will have to be more fiscally responsible,” all of them will moan and groan as they stick us with their ever-growing bill.
They’ve totaled the car again, and they want us to pay for it.
But that is what happens when you let politicians buy you with your own money. You reach the point where you realize that there really is no such thing as a free lunch.
It’s as phony as the Trojan horse they sold it to you with.
Even still, these characters never miss a beat, looking for some poor group to offload their bills on as they sell you the stars.
After all, the warfare/welfare/corporate/bankster/police state has to be maintained at all costs — even if it means the village gets destroyed in the process.
Meanwhile, a government of the people, by the people, for the people has become claptrap, as hollow as a campaign promise.
So here’s what you have to look forward to as the government decides once again that you can get by on less.
I mean, you really wouldn’t expect them to scrape by, would you?
You see, they own you and they’ve decided that those chains need to be a little heavier. Between the endless state of war, bailing out their banker friends, and buying votes, they just can’t keep their hands of out of our wallets.
It’s as natural to them as talking out of both sides of their mouths.
No matter how much we send them, it’s never enough.
It doesn’t matter that 61 percent of Americans “always or usually” live paycheck to paycheck; or that a staggering 43 percent of Americans have less than $10,000 saved up for retirement…
A bigger bill is on the way in 2011.
How the end of the Bush tax cuts will affect you
And it’s not just “the rich” who will get stuck with it.
For instance, earners in the lowest bracket will see their tax bill jump 50%, as their tax rate goes from 10% to 15%.
Meanwhile, every other bracket will creep higher with the 25% rate going to 28%; the 28% rate going to 31%; the 33% rate going to 36%; and the top bracket moving back to 39.6% from the current 35%.
Married couples will be punished again for their monogamy, as the standard deduction for couples returns to the same level as it is for single filers.
And parents will see the current child tax credit of $1000 cut in half to $500.
For those poor souls who pass on or after January 1, 2011, the death tax also makes a big comeback…
It slams the living with a 55 percent tax rate on estates over $1 million — which is hardly “rich” these days. (After all, a middle class person with two homes and a retirement account can easily fall into this confiscatory bucket.)
Didn’t they spend their entire existence among the living paying taxes?
But the wallet draining doesn’t end there.
Investors will also get hammered in 2011, as the capital gains tax will jumps from 15 percent this year to 20 percent the next.
On top of that, the tax rate on dividends will jump by 164% — going from 15% to 39.6% if nothing is done.
For dividend investors, that means that the budget battle shaping up in Congress is critical, since the size of the increase will be a key consideration in deciding whether or not to hold onto high dividend-paying stocks.
The Obama Administration budget proposal for fiscal 2011 does call for the tax rate on dividends to rise to just 20 percent…
But at this point, nothing is certain.
Either way, it promises to be a blow to the fixed income crowd, as the government prepares to take a bigger bite.
So here’s the bottom line: Without action, nearly every taxpayer will pay more in 2011 — not less.
If that happens, you can write off this “recovery” for good.
By the way, if you are wondering what your tax bill is going to look like next year if these tax cuts expire, pour yourself a stiff drink and click here: http://www.mytaxburden.org/.
I promise you that when the hammer lands, it is not going to be painless.
Your bargain-hunting analyst,
Steve Christ
Editor, Wealth Daily
