Can you believe a Tax Increase of 30% over the next two years? The Congressional Budget Office says – Yes!
Could the battle to minimize taxes and maximize the profitability of your business get any more challenging? You may not think its possible, but the Congressional Budget Office (“CBO”) answer this question with a resounding “YES!!”
According to the Budget and Economic Outlook published by the CBO last week, the amount of money the federal government takes out of the U.S. economy in taxes will increase more than 30% between 2012 and 2014. At the same time, logic and the CBO suggest the economy will remain sluggish – partly because of the higher taxes.
The CBO report states: “In particular, between 2012 and 2014, revenues in CBO’s baseline shoot up by more than 30 percent,” said CBO, “mostly because of the recent or scheduled expirations of tax provisions, such as those that lower income tax rates and limit the reach of the alternative minimum tax (AMT), and the imposition of new taxes, fees, and penalties that are scheduled to go into effect.”
“The pace of the economic recovery has been slow since the recession ended in June 2009, and the Congressional Budget Office (CBO) expects that, under current laws governing taxes and spending, the economy will continue to grow at a sluggish pace over the next two years,” said CBO. “That pace of growth partly reflects the dampening effect on economic activity from the higher tax rates and curbs on spending scheduled to occur this year and especially next. Although CBO projects that growth will pick up after 2013, the agency expects that the economy’s output will remain below its potential until 2018 and that the unemployment rate will remain above 7 percent until 2015.”
According to the CBO report, federal tax revenues equaled $2.30 trillion in fiscal 2011, and will increase to $2,523 trillion in fiscal 2012, $2,988 trillion in fiscal in 2013, and $3,313 trillion in 2014.
In dollar terms, the anticipated increase in federal tax revenue from fiscal 2011 ($2.302 trillion) to fiscal 2014 ($3.313 trillion) is $1.011 trillion. That is an increase of 43.9 percent.
From just 2012 to 2014, the increase in federal tax revenues from $2.523 trillion to $3.313 trillion equals $790 billion—or 31.3 percent.
What’s the answer for you, your family, and your business? Better and more proactive tax planning!
Source: http://www.cbo.gov/ftpdocs/126xx/doc12699/01-31-2012_Outlook.pdf (Chapter 4)