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These Little-Noticed Tax Hikes Are Raiding Your Wallet


Hidden city taxesIn a tough economy, the last thing many people can afford is for the government to take more of their money. Yet at least in some places, recent tax increases have already taken a big bite out of taxpayers' wallets, and the worst may be yet to come.

The looming expiration of favorable tax rates has grabbed the lion's share of attention lately: In just over six months, much higher tax rates are scheduled to take effect. If the government does nothing, those increases would boost tax bills for people at just about every income level.

But increasingly, state and local governments have been the culprits in making life more difficult for taxpayers.

As U.S. News recently observed, states and municipalities are pulling out all the stops to try to balance their budgets in the wake of falling revenue and greater demand on services. Here are some of the things they're doing:

  • More than a dozen states have raised their sales tax rates in the past five years, with the majority of those doing so by at least a percentage point. According to IRS estimates, each percentage-point increase in sales taxes could cost the typical family of four with a $50,000 income an extra $100 to $200 per year, depending on where they live.
  • States have also hiked other taxes. Illinois pushed its income tax rate from 3% to 5%, but many states have gotten extremely creative in the places they seek higher revenue from taxes and fees, focusing on little-noticed niche sources like hotel tax or fishing licenses.
  • Cities and towns tend to depend on property taxes, which have gotten hurt badly by drops in home prices. That's required big hikes in property tax rates in many areas.

What's Next?

The trend toward higher state and local taxes isn't likely to change anytime soon. The reason is that unlike the federal government, states and cities don't have unlimited borrowing power. Even as they weigh big spending cuts on everything from essential services to employee pensions, state and local governments are trying to balance lower spending with higher tax revenue to balance budgets.

As federal income tax rates become a big issue in this election year, remember to keep an eye on the other taxes you pay. The rises you've already seen could prove to be just the tip of the iceberg.

Motley Fool contributor Dan Caplinger wasn't thrilled when his sales tax went from 5% to 6.25%. You can follow him on Twitter here.

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Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

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Hi hate this

July 17 2012 at 12:56 AM Report abuse rate up rate down Reply

Obamacare tax - the biggest ever on the middle class.

June 28 2012 at 8:33 PM Report abuse rate up rate down Reply

Then there's the Obama tax increases that no one seems to notice!


Look clearly at the 2014 rate compared to the 2013 rate.

For those of you who are on Medicare, read the following. It's short, but
important and you probably haven't heard about it in the Mainstream News:
"The per person Medicare Insurance Premium will increase from the present
Monthly Fee of $96.40, rising to:
$104.20 in 2012
$120.20 in 2013
$247.00 in 2014."
These are Provisions incorporated in the Obamacare Legislation, purposely
delayed so as not to confuse the 2012 Re-Election Campaigns

June 27 2012 at 11:43 PM Report abuse rate up rate down Reply

I am apalled by the cluelessness of these posts. It seems that no one understands economcics or how much debt we are piling up due to entitlements:

Here is the "real" national debt as of June 2012:

Unfunded future social security liabilities $8.6 trillion (from Federal govt. stats)
Unfunded future medicare liabilities 38.6 trillion (from Federal government stats)
unfunded state and local public union pension plans 3.9 trillion (from JP Morgan)
State and local debt 2.5 trillion(from Federal government stats)
National debt as typically portrayed $15.8 trillion (and climbing by $15 billion each day)

Total national debt $69.4 TRILLION

Gross Domestic product annual $15.0 trillion

True national debt/GDP 463%

What you idiots do not comprehend is that the huge national debt is based on entitlement spending. Check the categories if you can draw yourselves away from the "blame the nasty business man" game.

Thew fact is that most of the private sector jobs in the US are NOT coming from the mega huge corporations. They are coming from middle market business where the owners put their own money, sweat and risk into the Company to make it grow and provide jobs. These business owners do not make mega millions each year. Nor have they been given any help from the Stimulus package or elsewhere.

The fact is that as of 2012 only 50% of the US eligible taxpayers will pay any federal income taxes-the other 50% will not. Yet the no payers will still receive entitlements and other services such as the national defense.

Yet Obama buries his head in the sand at the coming economic disaster that is fast over taking us as it already has for much of socialist Europe. The huge cost of these programs is now 40% of our national budget each year and rising if you factor in Social Security and Medicare alone. .

Educate yourselves, my firneds. Whjile Obama promises entitlements by robbing the so called rich to pay the poor, what he is actually doing is taking us ALL to bankruptcy.

June 26 2012 at 8:37 PM Report abuse +1 rate up rate down Reply

Vulture capitalist Mitt Robme at Bain Capital when he outsourced jobs:
I will take the pension fund money that I raided from your father and run for president and you will still vote for me.

June 26 2012 at 2:55 PM Report abuse -1 rate up rate down Reply

I realize its fun to point blame at a particular politician, depending on your political leanings. However, the simple fact of the matter is that this nation has been living on borrowed time for nearly 50 years. Social Security was designed to be a system that ran out of money.....its run out of money (anyone that points to the Trust Fund misses the point, which is that the treasury has to hand money to SSA to make good on the trust fund, and since the treasury is running a deficit, that means we are borrowing the money to make good on SS). Medicare will run out of money.

And on the state and local side, we have promised benefits in perpetuity to public sector employees that can't possibly be made good on. The estimated unfunded pension liability for all states and local governments is in the neighborhood of $100 trillion....thats roughly 800% of current GDP.

In our personal lives, the average american family has an income of $50K and credit card debt of close to $20K.

In other words, we have mismanaged our family finances, our local government finances, our state government finances and our federal government finances. We are now reaping that whirlwind.

June 26 2012 at 1:38 PM Report abuse rate up rate down Reply

Bush almost returned this country to what it was. A barren wasteland. (Without the Wholly Mammoths and glaciers of course)

June 26 2012 at 12:59 PM Report abuse -1 rate up rate down Reply

theives, liars, greedy lowlifes.....but in the end they will lose & perish and I will be laughing <><

June 25 2012 at 8:58 PM Report abuse rate up rate down Reply

Tax revenues are falling because the economy has been ruined. Increasing taxes to shore-up the short-fall makes a bad situation worse by taking even more money out of the economy putting even more people out of work.
It's amazing how one guy has destroyed the United States.....Al-

June 25 2012 at 8:14 PM Report abuse +1 rate up rate down Reply
1 reply to alfredschrader's comment

No, it's two guys. You forgot Dick Cheney.

June 26 2012 at 12:51 PM Report abuse -1 rate up rate down Reply

My utitly bill keep going up,the state puts a surcharges on the tax. New York tax on top of tax.Then they wonder why people leave the state......

June 25 2012 at 7:01 PM Report abuse +1 rate up rate down Reply
1 reply to patsy's comment

At the rate the Utility companys are going we be back to oil lamps and Candles

June 27 2012 at 9:08 AM Report abuse rate up rate down Reply