The WSJ tells the tale this morning – get ready for unprecedented tax increases on the middle class after the election. They will craftily employ semantics to say that no taxes have been raised; only that several tax benefits will be allowed to expire (all bold emphasis is mine):
The tax benefits are hugely popular with the public but they have drawn the panel’s focus, in part because the White House said these and other breaks cost the government a $1 trillion dollars a year.
At stake, in addition to the mortgage-interest deductions, child tax care credits, and the ability of employees to pay their portion of their health-insurance tab with pre-tax dollars.
The way things like this work is that the President calls for a bi-partisan commission to hash out these issues and deliver reports to Congress and the President for action. The beauty of it is that the bad news is delivered by those not facing the electorate, and then your Congress-critter and President can vote for it and say they were just following recommendations. The liberals blogs have taken to calling the deficit reduction commission as “the Cat Food Commission”, referring to the possibility that retired seniors will be forced to subsist on cat food. The best case scenario for the above will be the lowering of the amount of exemptions. The worst case scenario would be the loss of all exemptions. My personal increased taxation exposure in a typical year would be approximately $18,000 in taxable income, with an increased tax liability of $4680 (if taxed at 26%).
I’ve already received an email from my employer’s HR department regarding the taxation of tuition benefits:
If you are currently enrolled in or are considering enrolling in a graduate program [at the University], we want to make you aware of the pending expiration of the tax exemption currently offered under IRS Code, Section 127 and how this will affect your tuition benefit. This exemption allows employees to receive up to $5,250 in tax-free graduate tuition benefits each calendar year.
This exemption is set to expire on December 31, 2010. If Congress doesn’t renew it, the exemption will no longer be available as of January 2011. This means if you are planning to use [the University's] tuition benefit for Spring 2011 for any graduate programs (degree or non-degree), your benefit will be taxable from the first dollar. Generally, undergraduate tuition benefits are not considered taxable. However, if you’re in a program classified as graduate, any undergraduate courses you take while in that program will also be taxable.
The exemption has been extended several times since its initial creation, but at this time our office has no information on whether it will be extended again or allowed to expire. For this reason, we will treat your Spring 2011 tuition benefit as fully taxable. Please be prepared for the additional balance on your student account due to withholding from the elimination of the $5,250 exemption.
Rest assured, a Republican Congress indebted to the plutocrats and teabaggers will have no qualms sticking it to the middle class. Oh, and tax cuts for the wealthy will surely be extended.
Perhaps someone should ask the Congressional candidates where they stand on these issues?