Affordable Care Act
Oh my God. The more I learn about the actual implementation of the Affordable Care Act, the more my jaw drops. I have already spent a bunch of time analyzing how the massive subsidies will play out (and the associated incentives to make sure your income stays low enough to qualify for those same subsidies) but today I went to the other end, how the tax increases are going to hit the DINKs who both have good jobs.
It's a jaw-dropping tax increase. It's just one damn thing after another. The marriage penalty swoops in big-time. Credits phase out, exemptions phase out, deductions phase out, AMT takes a bigger bite, and then comes along higher brackets and the new surcharges (two different ones) and they are all cumulative.
We did an exercise today where we figured the tax liability for the exact same high wage earning family in 2012 and 2013, and their taxes on the same income were $23,000 higher. Instead of getting back $5K, they owed $18K, even after higher withholding at work.
I am not talking about how much their insurance costs, or any penalty costs, I am purely referring to the revenue-generating provisions that hit individual income taxes. I knew about some, but the way they pile on together, each phasing in at a new level, just creates an astonishing result. How am I going to explain this to my tax-paying clients? How do I prepare them?
If your income is under $100k you are likely to be able to figure out how to get on the receiving end of this wealth transfer. The answer is simple there: be very very careful about where the thresholds are and make sure you stay under them. But if your combined family income is over about $115k, bend over and drop trou, because it's just one damn tax increase after another.
Okay, quickly: strategies I can see: municipal bonds, put your children on payroll, put your spouse on payroll, long-term care insurance (now a front-page deduction for the self-employed) and finally, quit, because the new highest marginal rate is now over 65% going to taxes. Why bother getting up in the morning?
It's a jaw-dropping tax increase. It's just one damn thing after another. The marriage penalty swoops in big-time. Credits phase out, exemptions phase out, deductions phase out, AMT takes a bigger bite, and then comes along higher brackets and the new surcharges (two different ones) and they are all cumulative.
We did an exercise today where we figured the tax liability for the exact same high wage earning family in 2012 and 2013, and their taxes on the same income were $23,000 higher. Instead of getting back $5K, they owed $18K, even after higher withholding at work.
I am not talking about how much their insurance costs, or any penalty costs, I am purely referring to the revenue-generating provisions that hit individual income taxes. I knew about some, but the way they pile on together, each phasing in at a new level, just creates an astonishing result. How am I going to explain this to my tax-paying clients? How do I prepare them?
If your income is under $100k you are likely to be able to figure out how to get on the receiving end of this wealth transfer. The answer is simple there: be very very careful about where the thresholds are and make sure you stay under them. But if your combined family income is over about $115k, bend over and drop trou, because it's just one damn tax increase after another.
Okay, quickly: strategies I can see: municipal bonds, put your children on payroll, put your spouse on payroll, long-term care insurance (now a front-page deduction for the self-employed) and finally, quit, because the new highest marginal rate is now over 65% going to taxes. Why bother getting up in the morning?