| Federal Money is Thrown Around! |
Federal income taxes are expected to grow next year for a couple of reasons. One, many tax breaks are due to expire next year. Two, the country cannot sustain trillion dollar losses in its budget every year. When you divide a trillion dollars by the total number of Americans, the cost per person is more than $3,000. However, if you exclude non-working Americans like retirees, students, etc, a trillion dollars is more than $6,000 per working American.
The federal deficit has accumulated to over $14 trillion, which is nearly the same value of the Gross Domestic Product (GDP) or all the goods and services that the United States produces in one year. Every American's share of the national deficit is currently about $42,000 and growing rapidly. In addition, the interest that is owed on the national debt is also growing rapidly - faster than the typical American's salary each year.
Unless Congress intervenes, one of the taxes due to increase on January 1, is social security tax. It will be restored to its full tax rate of 6.2%, up from the 4.2% Americans are paying this year. A 2% increase in the social security rate may not seem like much, but it could have an impact on the economy. With Americans seeing a 2% drop in their paychecks, consumer spending should be affected which in turn will affect business revenue, profits, dividends, etc. This could affect the overall economy and the anemic job market.
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