New Yorkers: Get ready for tax increases – By George J. Marlin
The following appears in the June 15-21, 2012 issue of the Long Island Business News:
If the Bush tax cuts expire at the end of this year, middle-class New Yorkers will face the greatest tax increase in their lifetimes. Contrary to all the bombastic rhetoric insisting the cuts were a windfall for the rich, the reality has been that those changes to the tax code have favored households making less than $250,000 a year.
Here’s what New Yorkers can expect in 2013 if the tax hikes go into effect: Personal income taxes for low income earners will go from 10 percent to 15 percent. The marriage penalty will return, and the child tax credit will decline 50 percent to $500 per child. Higher earners will see their 35 percent maximum rate increase to 39.6 percent.
Add in New York’s maximum rate of 8.823 percent (which has gone up 29 percent under Albany’s so-called 2011 tax reform act) and Long Island’s top earners will be paying a combined top marginal rate of 48.42 percent.
Seniors will be hard-hit if the Bush cuts expire. The top rate on Social Security benefits, which now stands at 30 percent, will increase to 34 percent. Also, the tax on dividends will rise from a flat 15 percent to a maximum rate of 43.4 percent, a 286 percent increase. Many Long Island seniors, who are barely getting by, thanks to the highest property taxes in the nation, will have no alternative but to move to low-tax states.
Other 2013 tax hikes:
- The capital gains tax will go from 15 percent to 23.8 percent
- The death tax estate deduction will drop from $10 million to $1 million
- The death tax rate on estates will go from 35 percent to 55 percent
- The employee Social Security tax will go from 4.2 percent to 6.2 percent
- The alternative minimum tax, which presently affects 4 million households, will affect 30 million households.
And if ObamaCare survives the Supreme Court, tax increases embedded in the law will impact the bottom line of many New Yorkers in 2013. For families making more than $250,000 a year, there will be a 3.8 percent surtax on capital gains, savings account interest, dividends and rental income. These same families will also have to pay an additional 2.9 percent to 3.8 percent on their FICA rate for Medicare Part A.
Then there’s the 20 percent “medicine cabinet” tax individuals under 65 will have to pay if they use funds in their health savings accounts to purchase over-the-counter drugs.
Flexible spending accounts, which under current tax laws are unlimited as to dollar amounts, will be capped at $2,500 in 2013. This will hurt families with big medical bills and limit itemized medical deductions for seniors with high out-of-pocket medical expenses.
There will also be an excise tax imposed on the manufacturers of medical equipment. This will increase the purchase price of pacemakers and other life-saving devices.
A study released in May by the Tax Foundation reported that millions of people have fled the Empire State because it has the second highest state and local tax burden and ranks 49th in business tax climate. Over 3.4 million New Yorkers with a total income of $119 billion have emigrated between 2000 and 2009. The primary destination was Florida, which does not have a state income tax or an estate tax and has a sales tax rate of 6.62 percent – 21 percent lower than New York.
If the Bush tax cuts lapse, expect the Empire State’s tax base and skill power to continue to decline as scores of New Yorkers join caravans headed to tax-friendly states.Explore posts in the same categories: Articles/Essays/Op-Ed