Business Insider Business Insider – 1 year ago Today, President Barack Obama will sign an agreement on taxes and spending.
While many in Congress are still scrambling to work out the details of the deal, one thing is certain: it will impact how much businesses and entrepreneurs can raise their taxes.
Here are a few key takeaways.1.
What will the tax increase be?
The president is expected to sign the “fiscal cliffs” deal into law by the end of the week.
The new tax hikes will amount to about 10 percent of the income earned in the next decade, and will be retroactive to March 1, 2021.
The deal would also provide for a temporary tax cut for people who make more than $200,000, $400,000 and $500,000 annually.2.
What does it mean for businesses?
If the president signs the deal into the law, businesses will have to pay more than they otherwise would to stay in the country.
The average American would see their taxes increase by $100 or more over the next 10 years, according to a survey from the Tax Foundation.
The top 10 percent, however, would see an average tax increase of $2,100.3.
What are some of the big winners?
Businesses can expect to see a major boost in revenue from the deal.
The tax cuts would increase the total amount of revenue that businesses earn by $4.6 trillion, according the Tax Policy Center, which also found that businesses could see their profits rise by $2.1 trillion.
For example, the tax cuts could add $1 trillion to the economy in 2019 alone.
And if you’re a large company that has multiple offices, the deal could boost your revenues by $6.2 trillion over the same period.4.
What is the ‘fairness’ of the tax hikes?
Under the deal and the revenue increases, businesses would be allowed to take a tax break on their income from a special depreciation on assets such as land, buildings and equipment.
This would reduce their tax bills and could even increase the tax revenue.5.
What impact will this have on my taxes?
If you earn more than your employees, you will likely see a higher tax bill.
The threshold for tax rates has increased since the Bush administration, but that doesn’t mean you have to take the extra tax burden on yourself.
You can still deduct the value of your investments and deductions.
But if you earn under $150,000 a year, the deduction you can take for the standard deduction will go away.6.
What happens if Congress does not pass the deal?
If Congress doesn’t pass the tax deal, it could delay the final implementation of the cuts until 2021, according The Washington Post.
That means businesses and taxpayers could face significant additional tax hikes for the coming years.
The president has promised to address the economic downturn by increasing the Earned Income Tax Credit and the Child Tax Credit, both of which were scheduled to expire at the end, but those will not be available until 2021.7.
What do I need to know about the tax agreement?
The deal will likely affect about 80 percent of Americans.
And the tax cut will help companies by helping them reduce their payroll costs, said Steven Rosenthal, a senior fellow at the Tax Center.
“If you have people who are doing well and don’t make a lot of money, you may have a better chance of avoiding paying more taxes,” Rosenthal said.
But for businesses, the cuts could boost their tax bill by about $2 billion, he added.8.
How much will the deal raise the federal debt?
According to the Congressional Budget Office, the final deal will increase the debt by $3.2 to $12.5 trillion, or about 15 percent of gross domestic product.
The debt would also increase from a projected $16.2 billion in 2020 to $20.4 billion in 2021.9.
What other factors could affect my taxes if the deal is signed?
There are some other factors that will affect your taxes if Congress passes the deal as expected.
First, if you make more money than your average worker, your tax bill will increase by about 1.5 percent.
And even if you earned less than $150 for the year, your taxes will go up by 2.5 to 6.5 percentage points.10.
What if I don’t want to pay taxes?
The tax cut deals won’t be fully phased in until 2021 or 2022, according Toi.com, the online news site.
That could delay tax reform for some Americans.
If you have any concerns, you can reach out to your tax professional for advice.