Temporary payroll tax cuts will expire, causing worker's paychecks to be reduced by 2%. Shifts in alternative minimum tax will affect millions of taxpayers. The tax cuts from 2001-2003 will be rescinded. Many government programs (including Defense, Medicare, and Education) will be in line for deep cuts. If these changes occur, the reaction will likely spark another recession.
Possible alternatives that are being bandied about are very concerning. There has been a lot of talk about higher taxes for "the rich", or closing tax loopholes. But who decides who are "the rich"?
The really frightening stuff I'm hearing discussed are possibilities such as:
- Taxation of existing wealth (as opposed to income). Never mind that we already paid taxes on what we have, which came from work income. This is double-taxation.
- Elimination (or reduction) of homeowner mortgage deductions. How many more people will lose their homes if they don't have this deduction?
- Social Security ineligibility for individuals with more than a certain amount of net worth. This is not an entitlement. This is our money that we earned that the government promised would be paid back to as retirement income. We counted on that.
- Dividend income for investors could become taxable, further discouraging investments and economic growth. Given that companies already pay tax on their profits, this would be another form of double-taxation.
There is a very real possibility that our elected government officials will be threatening the long term plans of millions of citizens who have worked hard to earn what they have.
If you aren't following the news on this, I strongly suggest you stay tuned in. I'm fearful that some of our country's basic principles are being threatened. These are the types of threats that spark actions generated by fear and uncertainty. Companies will stop hiring and eliminate positions - again, and unemployment will rise at the same time unemployment benefits will have to be cut. People will take their money out of investments to hoard cash and precious metals. What other adverse reactions will there be when people feel their well-being and way of life is under attack?