Taxmageddon Draws Closer

Special Report - August 22, 2012
A recent report from the Tax Foundation estimates that a Congressional proposal to stave off the effects of the so-called “Taxmageddon” (when several tax cuts are set to expire) this January would save North Carolina taxpayers at least $1,130 in taxes. The report, “How the States Would Be Affected by Extension of the Bush Tax Cuts and Other Provisions,” was released August 1 and analyzed the effect of a U.S. House bill to extend a variety of tax cuts for each of the 50 states. The report concluded, “All 50 states would benefit from this bill, though some more than others.”

In less than five months, the largest tax increase since World War II will take effect unless Congress acts to prevent the scheduled simultaneous expiration of several ta cuts. The so-called “Taxmageddon” would result primarily from the expiration of the 2001 and 2003 Bush tax cuts, and the Alternative Minimum Tax (AMT). The report uses data from the Joint Committee on Taxation’s analysis of H.R. 8—The Job Protection and Recession Prevention Act of 2012. H.R. 8 most notably seeks to extend the Bush tax cuts of 2001 and 2003, as well as to patch the AMT. Should the bill pass with both the Bush tax cuts extension and the AMT patch, North Carolina taxpayers could save as much as $2,126 on their annual taxes. Without the AMT patch included, North Carolina taxpayers would save an average of $1,130 on their taxes. In total, North Carolina taxpayers would save between $4.75 billion and $8.93 billion, according to the Tax Foundation report.

The report cites the Joint Committee on Taxation projection that the U.S. House’s proposed AMT patch “would save middle- and high-income taxpayers about $193 billion.” An extension of the Bush tax cuts are projected to “save taxpayers about $179 billion.” H.R. 8 also seeks to extend the “estate and gift tax provisions for one year” in order to save “taxpayers $31 billion, and small business expensing, worth $581 million.” In total, the House proposal would include an estimated $403 billion in total tax relief, equaling about 2.7 percent of the economy, almost all of which “would be immediately felt in 2013.”

Related resources:
Tax Freedom Day Arrives - April 18, 2012
Report Says NC Tax Reform Needed - April 10, 2012
North Carolina Over-Taxed - February 3, 2012
Benefits Abound from Lower Taxes - May 17, 2011
Squeezing Families: How Expanding Government Undermines the Family - FNC - Fall 2010
NC Leads in Tax Increases - January 19, 2010
North Carolina’s Entrepreneurship Ranking - December 31, 2009
Report Says NC Tax Eighth Highest - October 27, 2009
Tax Policy, Marriage, and the Family - FNC - Fall 2006

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