As Fiscal Cliff Approaches, Possible Tax Increases in 2013
The current Congress, which some have graded as the least effective in recent history, returns to session mid-November before breaking again on November 17. They will take another week off for Thanksgiving and hope to adjourn by mid-December. Many will be watching the progress they can make on averting the fiscal cliff in such a short amount of time.
If there is no action taken between now and the end of the year, Americans’ taxes are going up. Here are some of the major changes that will automatically kick in if no agreement is reached:
Federal Income Tax Rates: The Bush tax cuts were originally set to expire in 2010 and were temporarily extended for two years due to legislation passed in 2010. If Congress fails to act, these will simply expire. The new brackets would be as follows:
Tax Brackets 2012 2013
Up to $8,700 10% 15%
$8,701-$35,350 15% 15%
$35,351-$85,650 25% 28%
$85,651-$178,650 28% 31%
$178,651-$388,350 33% 36%
$388,351 + 35% 39.6%
Alternative Minimum Tax Increase: One thing about the AMT is that it has never been indexed for inflation. It was originally designed to prevent the extremely rich to avoid paying taxes by using large tax deductions. Congress has never fully dealt with the indexing problem, so year to year they use a band-aid approach. Without any deal, more Americans will be subject to this tax. Some estimates are as high as 20 million taxpayers will see an increase.
Capital Gains Taxes Going Up: Long term capital gains rates are currently tax at 15%. Capital gains are the tax paid on the difference between the sales price of an investment asset and the basis, or cost of the original purchase. Without any action, these rates are slated to climb to 20%.
Payroll Tax Holiday – Say Bye: The payroll tax cut was supposed to be temporary, but in typical Congressional fashion, is now on its second year. The cut reduced payroll contributions to Social Security for employees from 6.2% to 4.2%. While this has increased the take home pay for every American, it has also put a huge hole in the Social Security Trust Fund. Without any action, this will expire on January 1st.
Revenue Growth Remains Strong for October
The October monthly revenue report showed the state of Iowa continuing to experience faster than projected revenue growth in fiscal year 2013.
The Legislative Services Agency reported that state net revenue for October was 15.4 percent higher than October 2011. Every source of tax revenue to Iowa showed increases over the previous October, with corporate tax receipts (up 25.4%) and Sales and Use tax (up 16.8%). Refunds to taxpayers were also down in October, which also added to the strong revenue numbers.
Revenue for the first four months of FY 2013 is up $185.2 million over FY 2012, for an increase of 10.3 percent. The October Revenue Estimating Conference (REC) estimate had revised FY 2013 revenue growth to an increase of $183.5 million or 3 percent. The October revenue report shows the state has already exceeded the estimated total growth for all of FY 2013 in first four months of the fiscal year.
The first part of the fiscal year has seen very strong corporate tax receipts. As compared to FY 2012, these have increased by 31.5 percent so far this year. The current REC projection for this class is 11.6 percent growth for FY 13. Personal income tax receipts have also been strong, growing by 6.9 percent. This is also above the REC projection of 5.3 percent growth. Sales and Use tax receipts are also running ahead of the REC projection, at 6.1 percent growth so far this year.
While the strong revenue numbers may continue for the rest of the fiscal year, it is important to note that revenue has yet to feel any significant impact from this summer’s drought. Members of the REC raised concerns that the growth in corporate income tax revenue would, at some point, slow down as purchases related to agriculture drop off their current pace. At the Legislative Council Fiscal Committee meeting on October 18, ISU Extension reported that droughts of similar severity had impacted the state’s economy for three years after the drought started.
IDALS Notes $60.7 Million in Organic Sales in Iowa in 2011
On Wednesday, October 31, 2012, the Iowa Department of Agriculture and Land Stewardship (IDALS) issued a press release in which Iowa Secretary of Agriculture Bill Northey highlighted a report from the USDA National Agriculture Statistics Service (NASS) that Iowa’s 467organic farms had $60.7 million in sales in 2011, which represented two percent of the U.S. total. Iowa ranks fifth in the nation in the number of certified organic farms which cover 81,634 total acres.
Sales of organic crops in Iowa accounted for $29.6 million, livestock and poultry sales accounted for $6.3 million, and livestock and poultry products accounted for $24.8 million. Sales of organic vegetables were $1.09 million, organic fruit sales were $23,849, and sales of organic berries were $30,777. Iowa lead the nation in organic soybean production and 423,350 bushels and was second in production of organic corn for grain with 2.2 million bushels. Iowa was also first in organic oat production with 426,857 bushels produced. Iowa led the nation in organic hogs and pigs, with a peak inventory of 5,955 head and total sales of $2.68 million in 2011. Iowa also ranked first in organic goat inventory and organic milk from goats. The full results of the 2011 Certified Organic Production Survey can be found at http://bit.ly/2011OrganicSurvey. IDALS is one of more than a dozen state departments of agriculture and 51 private organizations that are accredited as organic certifiers. The Department is accredited by the USDA’s National Organic Program (NOP) to certify all aspects of the organic food chain including: organic crops, organic food products, organic feed, organic livestock and handling/processing of organic products. IDALS currently certifies over 250 producers and 60 handling/ processing operations located in Iowa and neighboring states.
NEWS FROM DISTRICT 96
This is my first newsletter as the newly elected representative for house district 96. This new district includes all of Delaware county and 5 townships in northwest Jones county including all of Anamosa and Monticello.
I want to thank everyone who voted in the election. You excised your right as a citizen. I urge you to continue to stay engaged by being informed. Please contact all of your elected representatives when issues arise that are important to you. They can not act on your behalf if they don’t know what is important to you.
December will be a busy month as I prepare to return to Des Moines for the start of the session on January 14th. The calendar is filling up fast with meetings. If you have an issue that you would like to discuss, please email me at lee.hein@legis.state.ia.us or give me a call at 319-480-1997.
I hope you had a blessed Thanksgiving and wishing everyone a wonderful Holiday season.
Lee Hein 