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Examiner
  • Ron Finke: Good deal for most taxpayers

  • At 12:15 a.m., so to speak, Congress acted on the first of January. Were they trying to show us how dedicated they are when they have not done their work in a timely manner? In private business, workers who repeatedly don’t meet deadlines or create effective budgets get fired. We the people just keep electing them for decades.

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  • At 12:15 a.m., so to speak, Congress acted on the first of January. Were they trying to show us how dedicated they are when they have not done their work in a timely manner? In private business, workers who repeatedly don’t meet deadlines or create effective budgets get fired. We the people just keep electing them for decades.
    At any rate, those of us who have incomes less than $400,000 individually or $450,000 jointly face only a few major forms of tax increase. But those are contingent on many factors. We definitely did not want anything to be simpler, did we?
    First, if you earn wages, you are again paying 6.2 percent of your earned income (up to $113,700) into the Old Age, Survivors and Disability Insurance pot. To stimulate consumer spending, it had been decreased by 2 percentage points for workers while employers continued to pay the full 6.2 percent. Those fortunate enough to earn the maximum will pay an extra $2,425.20. Because the maximum rose by $3,600, employers will pay an extra $223.20 for higher income earners.
    Next, to help finance the Affordable Care Act (Obamacare) benefits, earned income in excess of $200,000 per worker or $250,000 for a couple will cost another 0.9 percent. This is in addition to the combined 2.9 percent already charged to workers and employers on unlimited amounts of income.
    Concerning adjusted gross income from whatever sources, the benefit of itemized deductions and personal exemptions begins to be phased out at a level of $250,000 per individual and $300,000 per couple.
    In a manner that unfairly whacks any taxpayer with the bad fortune to be ill (or at least a hypochondriac), only your medical expenses including insurance premiums over 10 percent of adjusted gross income (not 7.5 percent as before) are deductible. I guess at any income, sick people are fat cats now.
    From there, examination of a dozen or more sources of information on the 157 pages of the January 1 Deal just clouds one’s knowledge and excites the imagination.
    What I do understand is that most of the people with whom I am privileged to work will still have a fantastic deal with respect to investment income including capital gains.
    For those still in the 10 and 15 percent federal tax rate brackets, you will still pay $0 on your long-term capital gains. Is that a great deal or what? It has become very difficult to even wait 12 months to harvest long-term capital gains in volatile markets. But then, even your short-term capital gains are taxed at those 10 and 15 percent federal brackets, plus your state income tax.
    The bad news? These tax law changes amount to wishful thinking for higher total tax revenues in the worst case. At best, the net effect will help no more than spitting in the ocean of our current and future national debt. Your best strategy will continue to be to make as much as you can, save as much as you can, give as much as you can, and yes, pay as much tax as you can. That is my personal plan for 2013.
    Page 2 of 2 - (This is not designed to constitute tax or legal advice, either in general or specific cases. Primary sources for information include www.cbsnews.com and www.forbes.com.) 
    Ron Finke is president of Stewardship Capital, a registered investment adviser. This is general advice and not meant to contain specific recommendations. Reach Finke at rcfinke@stewcap.com.

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