Word: taxingly
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Dates: during 1990-1999
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That's not all bad. A prosperous economy leads to more personal income, which shoves more taxpayers into higher tax brackets, so they owe more in taxes. Thus the taxpayer burden may grow faster than income, and taxpayers still get ahead. That's the way our progressive tax system works: the more you make, the higher your tax rate. But it is one of the hidden ways taxes are on the rise. Here are some others, and what to do about them...
Rising FICA burden. Beginning this year, you will pay Social Security tax on the first $72,600 you earn--up from the $68,400 threshold in 1998. That's a 6.1% hike, a rate that is roughly double the pay increase most wage earners will see. For anyone whose income exceeds that higher level, it means an extra $260.40 a year owed to the feds. Tip: earnings stashed in a flexible-spending account at work are exempt from FICA withholding. In a two-earner household, it may pay for the lower earner to fund the account...
Alternative minimum tax. Designed to afflict only the superrich, this monster increasingly soaks the middle class. More than 1 million taxpayers will owe it this year, and 9 million by 2008--including many earning considerably less than $100,000 a year. Little more than a decade ago, fewer than 100,000 people were subject to the AMT. It's a complicated tax that targets folks who avoid most traditional income taxes through large credits and deductions. High earners in high-tax states are most vulnerable, but anyone taking a large deduction for business expenses can fall victim. Tip: consult...
Mutual fund taxes. Heaping insult on injury, many investors owe 1998 tax on capital gains recorded by their mutual funds, even if those funds lost money. More than 30% of stock funds were down through November, and 11% of those--including such popular funds as Heartland Value, Lindner Dividend, Brandywine and Templeton Growth--also distributed a taxable capital gain to shareholders, says fund-research company Wiesenberger. Tip: taxable distributions typically result from rapid-fire trading. This year, look for funds with a low turnover rate, something less than 100%. Stock index funds are among the most tax efficient. And never...
...have a lot less fun. In order to finance the Arkansas Project, an effort to find something dirty on Bill Clinton, Scaife coughed up roughly the same sort of money that Flynt offered in the advertisement he took to flush out bimbos with Republican leanings. Scaife was using tax-free foundation money, which simply reflects the fact that Republicans tend to be better at personal finance--although, now that I think of it, maybe Flynt can prove to the IRS that for a man in his line of work, payment for dirty information is a legitimate business deduction...