Potential changes in the tax laws proposed by President Obama mean that right now is a great time to start budgeting for your 2012 taxes. One major change will be a change for those in the highest tax bracket from fifteen to nearly forty percent as part of sweeping increases in taxes collected from high-income individuals in the next ten years.
The plan calls for high taxes on earnings from dividends, a departure from earlier policies that protected earnings on this type of income. The White House feels that the system for taxing investment earnings is one of the most unbalanced part of the current tax code, and this measure is one step to help fix the issue.
For those planning for their 2012 taxes, this means that individuals and couples need to begin looking at their investment income from previous tax years and determining whether they will be subject to these increased tax rates. Setting aside additional money from a monthly or yearly budget to cover this potential tax increase is the best way to offset the effect of higher rates without suffering tax-time shock.
The overall goal of President Obama’s tax changes is to reduce the federal budget deficit that has plagued the US during this economic downturn. While this change is not expected to eliminate the deficit entirely, it is part of a long term plan to use tax money from wealthy Americans to reduce the tax burden on lower income workers while still raising needed revenue.
- Obama’s Proposals To Increase Tax Revenue (2011tax.org)
- 2012 Taxes, And A Look At Obama’s And Romney’s Budgets (2010tax.org)