Raising taxes is a good way to get voted out of office. The question for politicians then be comes how does one increase taxes without increasing taxes? We are about to see how. 

2010 is a unique year from a fiscal perspective. The issue at hand is the Bush Tax Cuts. They have slowly lowered the tax rate in various areas of the tax code to the point where we now have no estate tax this year. To give you a point of comparison, the traditional estate tax rate is 55 percent. In short, we are talking about big savings. 

The federal government is in a sticky situation this year. They’ve been spending money like mad. At the same time, tax revenues are down thanks to massive unemployment during the Great Recession. With an annual deficit of nearly $1.5 trillion, money needs to be raised and fast. That would typically mean new taxes, but there is a wrench in the proceedings – this is a tax year.

All of this brings us to the simple question. How do politicians raise taxes without raising taxes? The answer is all about perspective. Specifically, we have to look at what one means by the term “raising”. Ah, don’t you just love government!

The issue at hand is what happens when the Bush Tax Cuts expire at the end of 2010. The way the changes were incorporated into law, the tax code will essentially revert to where it was before the cuts were made. This means that the politicians in office will merely have to do…nothing and they will see more tax revenues coming into the coffers. Technically, they will not have “raised” taxes. They will simply have not kept the Bush Tax Cuts in place. 

What does this mean to you? It means that tax planning should be on your “to do” list before the end of the year. A host of taxes will be resetting on January 1, 2011 and not in a positive way. To avoid excessive financial pain, contact us today at (800) 341-5433 or via this contact form to learn more about avoiding a big tax hit.