The Heritage Foundation, a national conservative think tank, says that what it calls “Taxmaggedon” will cost Mainers filing a tax return an additional $2,662 each.
Even worse, according to the foundation, Maine as whole will experience a total of $1.85 billion in increased taxes in 2013.
“Taxmaggedon” is what The Heritage Foundation has dubbed a slew of major tax increases that are set to take effect next year. The foundation pulled the tax-increase data it used for its study from the IRS and estimates from the Office of Management and Budget and Joint Committee on Taxation.
The data shows that the United States will see a total tax increase of $494 billion in 2013 alone—the highest ever in U.S. history for one year.
The group says that 34% of the tax increase will be made up of increases that come from the expiration of the Bush-era tax cuts. There is now debate in Washington about whether to renew the business-friendly tax rate that Bush set in his presidency or let the rates increase dramatically in 2013.
Another 25% of the highest-in-history tax increase is made up of a payroll-tax increase, which is also set to go up in 2013. According to Heritage, “most of the remaining increases come from Obamacare, notably from the start of the hospital insurance 3.8% surtax on all forms of income over $250,000.”
For Maine, the foundation says the billions in increased taxes nationwide means thousands in additional taxes for each Mainer. With an average income per tax return of $50,742, Maine isn’t hit as hard as some other states that have a higher average income on their tax returns. For example, Maine’s neighbor New Hampshire, with an average tax return income of $66,940, will see an average tax increase of $3,630 per tax return because of “Taxmaggedon.”
The Heritage report says that “Taxmaggedon” will hit the middle class the hardest. “Taxmageddon falls primarily on middle- and low-income Americans,” the report says. “That’s because 60 percent of the Bush tax cuts went to middle- and low-income taxpayers. The expiration of the patch on the Alternative Minimum Tax (AMT) will cause these taxpayers to pay a tax they were never supposed to be hit with, and the expiration of the payroll tax cut is a tax hike almost exclusively on middle- and low-income families.”
There is an indirect impact on middle-class Mainers as well. Heritage says the impending tax hikes set for 2013 have already discouraged business from hiring. Additionally, the uncertainty involved with the tax rates is enough for many businesses—including small-businesses here in Maine—to put the hold on further investments in their business until they know for sure what the tax rates will be, according to Heritage.
President Obama and Congress can still act to renew the Bush-era tax rates.
“Families, businesses and investors need to know how much more they’ll pay in taxes next year before they make important economic decisions,” the foundations says. “This means they, and the rest of the economy, are stuck in neutral while they wait to see if Congress and the President will act.”
This story was published by TheMaineWire.com.