Tax Increases By Any Other Name

On January 1 of this year the federal government raised taxes on so-called high-income taxpayers in a variety of ways—higher tax rates on income (including capital gains and qualified dividends), phase-outs for itemized deductions and personal exemptions, and additional Medicare taxes on earned income and net investment income. So the government couldn’t politically add more tax increases for 2014 … or could it?

In 2014, there are new government fees that essentially raise taxes. After all, payments to the government, whether labeled taxes, fees, penalties, fines, or something else, all do the same thing, which is transfer funds from taxpayers to the federal coffer. “A rose by any other name…”

Here’s what to expect in the New Year:

  • There is an increase in the Transportation Security Administration’s airline security “fee” to $5.60 per flight ($11.20 round trip); it is currently $2.50 per flight ($5.00 round trip) (effective January 1, 2014). This fee is in addition to the domestic transportation tax of 7.5%, a U.S. international transportation tax of $17.20, and a travel facilities tax of $8.40. While the amount of the tax increase sounds nominal for the casual traveler, businesses with substantial travel budgets will feel the pinch.
  • There is a “shared responsibility” penalty of the greater of $95 or 1% of household income for individuals who do not have “minimum essential coverage” at the start of the year (or some other later date under Administration delays) (effective January 1, 2014). The “shared responsibility” penalty of $2,000 per employee or more on employers with 50 or more full-time or full-time equivalent employees who do not provide coverage does not start until January 1, 2015.
  • There are new taxes on health insurers, including a user fee for offering coverage through the government exchanges … costs that are effectively passed on to consumers through higher premiums (effective January 1, 2014).

In addition to federal tax increases, there may be state-level tax hikes for the coming year. Here are some examples:

  • North Carolina is imposing a sales tax on tickets to movies, museums, college and professional sporting events and other live entertainment; service contracts (including warranties, maintenance agreements, and repair contracts); and manufactured homes and modular homes sold at retail (effective January 1, 2014). Other taxes will be imposed on the sale of electricity and natural gas (effective July 1, 2014).
  • Pennsylvania is raising fees for driver’s and learner’s permits, license tags, and fines for traffic tickets (effective January 1, 2014).

Final thoughts
Just because “taxes” aren’t increasing, payments to governments are going up for many businesses and individuals. Translate the label of the payment—fees, fines, penalties, or something else—and you likely will see an increased payment obligation so that federal, state, and local governments can deliver on their promises.

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