|For the week of April 9, 2012|
Enjoy that Tax Break While it Lasts
If you haven’t filed your 2011 tax return, time is running out. This year’s April 17 deadline is just around the corner.
For all taxpayers, another deadline is looming. This year’s reduced income tax rates will expire at the end of this year. The reduced rates range from 10 percent for low-wage earners to 35 percent for the top earners. We’ve been paying those reduced income tax rates since 2003, but next year the bottom rate will jump to 15 percent and the top rate will rise to 39.6 percent.
The bottom line is that if you file as an individual, your taxes are about to go up even if Congress doesn’t take another vote this year.
The median U.S. income is $51,914, according to the Census Bureau. Folks at that income level fall into the 25 percent tax bracket. Come January, they’ll be bumped up to 28 percent, and their annual tax bill will go from about $6,700 to $9,000. People in the top bracket will pay at least $18,000 more in taxes next year. Sadly, those on the lower end of the income spectrum could pay about $700 more next year. That may not seem like a make-or-break difference to many of us, but to someone who is just getting by on $25,000 a year or less, every penny matters.
Income tax rates affect almost all of us, but they can affect farmers and ranchers in a unique way. Farmers face constant pressure to update and improve their farms, either to reduce their production costs and remain competitive, to expand to accommodate more members of the family or tap into new markets, or to comply with new industry standards or government regulations. Without an extension of the current income tax rates, farmers and ranchers will have less money to plow back into their farms. The effects can ripple through rural economies, where farm implement dealers, feed stores, lumber mills, hardware stores and other kinds of businesses benefit when farmers and ranchers have money to reinvest in their operations.
For the rest of us, higher taxes mean less money to spend at the grocery store, in restaurants or at the shopping mall, just when the economy is beginning to show signs of life.
Congress probably won’t tackle any major legislation before Election Day, Nov. 6. After that, there will be a short window of time in which to extend the reduced income tax rates, estate tax and capital gains tax rates and other tax policies that have helped our nation weather the economic recession.
Congress has taken a long vacation from tax issues, but the bill for that vacation is about to come due. It’s time for Congress to take a hard look at how higher taxes would bring our nation’s economic growth to a halt. Otherwise, many of us will be in for an unpleasant surprise about a year from now.
Lynne Finnerty is the editor of FBNews, the American Farm Bureau Federation’s official newspaper.