A raft of tax cuts were passed during the George W. Bush administration, popularly referred to as the “Bush tax cuts.” The Bush tax cuts are set to expire again at the end of this year unless re-extended, which is now being referred to as “Taxmageddon.”
At least it isn’t being called Taxgate
A lot of things are getting “-ageddon” and “-gate” suffixes by the media, creating portmanteaus. It might be starting to get used a bit too much, as few things are really as bad as Armageddon, the prophesied end of the world, or as scandalous as the Watergate incident.
Despite consternation at such overuse, the latest “-ageddon” is “Taxmageddon,” the name that’s being given to the expiration of the Bush-era tax cuts. Last time they came up for renewal was in 2010, when they were extended. The Bush tax cuts are set to expire again at the end of this year, according to the Washington Post, along with a payroll tax cut and previously-agreed-to spending cuts.
Taxes the mind
Among the possible negative effects is an immediate tax increase. In 2000, according to Congressional Budget Office and Office of Management and Budget data posted by the Heritage Foundation, tax revenues were at their peak in the U.S., as tax revenue accounted for 20.6 percent of GDP.
After the Bush tax cuts were enacted, it dipped to slightly more than 16 percent, 2 percent lower than the 18.1 percent historical average, reaching 15 percent by 2010.
Tax revenues as part of GDP have started rising again already, but should the Bush tax cuts and payroll tax cut expire, it will rise to almost 20 percent by 2013, exceeding it by 2017. In other words, it will raise taxes significantly and immediately. An additional $500 billion would be collected in tax revenue, according to USA Today. According to Reuters, it adds a further $5.8 trillion in taxes in the next decade.
Households making the national median income of $50,000, according to the New York Times, will face an additional $1,750 annual tax burden, just enough to send a lot of people looking for personal loans to pay their annual tax bill.
The Congressional Budget Office projects $100 billion in spending cuts along with increased taxes, according to the Washington Post.
Wealthier people may have a bit more to worry about as, according to SmartMoney, estate taxes and gift taxes will rise along with income and payroll taxes. However, that’s only an issue to people who have a lot to leave to someone.
A benefit, according to the Washington Post, is a significant reduction of the national debt, which will be lowered to 57 percent of GDP by 2037. However, many economists and officials believe the added tax burdens and spending cuts will induce a new recession.
USA Today: http://content.usatoday.com/communities/theoval/post/2012/06/gop-warns-against-obama-taxmageddon/1#.T8-ZAlLPe_0
Smart Money: http://www.smartmoney.com/taxes/income/preparing-for-taxmageddon-1337724496427/