In Shakespeare's classic drama Romeo and Juliet,
star-crossed protagonists from feuding families meet and fall in love.
In Act II, when the impossibility of their courtship has become clear,
Juliet leans out her balcony and declares to her lover "What's in a
name? That which we call a rose by any other name would smell as sweet."
The line, of course, implies that Romeo's last name should mean nothing, and the two should be together.
Shakespeare
may or may not have been right about love and roses. But what about
taxes? Does that which we call a "tax," by any other name smell as sour?
Apparently, Washington thinks not -- if you pay attention to all the
new euphemisms, you'd think Washington has given up imposing new "taxes"
entirely!
In 1952, the IRS started charging "user fees" when
the government provides special benefits to a recipient beyond those
given to the general public. Today the government raises over $200
billion per year in fees for services like approving retirement plan
applications, driving heavy vehicles, entering national parks, and even
walking to the top of the Statue of Liberty. But "user fees" are still
"fees," and Americans seem to have figured out that trick. So, what now?
Now
we're seeing even more clever names for what most of us would consider
plain old taxes. Take, for example, the new "unearned income Medicare
contribution" that goes into effect on January 1. This is a 3.8% levy on
"investment income" (interest dividends, capital gains, rents,
royalties, and annuities) for individuals earning over $200,000 or joint
filers earning over $250,000. Washington created it as part of the
Obamacare package, along with an increase in the Medicare tax on earned
incomes over those same thresholds. But, while they call it a
"Medicare contribution," the money doesn't actually go into the Medicare
trust fund. It goes straight into the general revenue fund, where
Washington can spend it on whatever they want.
The "unearned
income Medicare contribution" isn't Obamacare's only euphemism for
"tax." Beginning on January 1, 2014, applicable large employers with 50
or more employees have to offer their employees minimum essential
coverage or pay a $2,000/employee "assessable payment." That's a nondeductible "assessable payment," by the way, so the actual cost might be even higher. Sure sounds like a tax to us.
Finally,
there are taxes in disguise that have the same bottom-line effect as
more direct taxes. If you start taking Social Security benefits before
your normal retirement age and earn more than the retirement earnings
test exempt amount ($14,640 for 2012), you'll pay a Social Security
earnings penalty of one dollar for every two dollars you earn above that
limit. Doesn't that sound like a 50% tax? (The penalty drops to one
dollar for every three dollars in earnings above $33,880 in the year you
reach normal retirement age, then disappears after that year.)
The
good news here is that we can help. Whether you're looking to pay less
"tax", minimize your "unearned income medicare contribution," sidestep
the "assessable penalty," or avoid the "Social Security earnings
penalty," planning is your plain-English solution. So call me -- and make sure you do it now
before Washington comes up with any more new names for taxes! And
remember, we're here for your family, friends, and colleagues, too!
Kenneth
Hoffman counsels Entrepreneurs, Professionals and Select Individuals in
taking control of their taxes, and businesses. Discover how I can help
you overcome your tax and business challenges. To start the conversation
or to become a client, call Kenneth Hoffman at (954) 591-8290 Monday -
Friday between 8:30 a.m. to 1:00 p.m. for a no cost consultation, or
drop me a note.
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