Where Are Taxes Headed in 2011?

It’s that time of year. You know, when people like myself peer into our hazy crystal balls and predict the future with amazing accuracy. In this article, we take a look at where taxes are headed in 2011.



As I write this, the effort to extend the Bush Tax Cuts looks like a sure thing, but is still winding its way through Congress. Still, I feel fairly confident predicting they will make their way through and give us another year or two of low, low tax rates as the government tries to revive the economy. Of course, another $700 billion tacked on to the national deficit will probably kill any impetus, but we’ll worry about that down the road. Let’s just pray it isn’t a very short road!



2011 will not be the year of significant movement at the federal level. So, does that mean you are home free? Not a chance, my friend. You are going to get hit with the tax stick till you beg for relief. While the feds may not be doing it, the state and local governments will.



Let’s be blunt. The vast majority of states are flat broke and they can’t borrow money. This creates a unique situation. While the federal government falls all over itself to save Wall Street bankers, the political scuttlebutt is they may be unwilling to bailout states like California and Illinois when the come to Washington, D.C. with hat in hand.



This will lead to the states looking for help from another source. In this case, "help" will consist of new and higher taxes. I probably don’t have to tell you that the "source" will be you and me. The states have already been taxing like mad in 2010. Expect it to continue in 2011 as it becomes apparent that the government claims of an economic recovery are simply false. The economy is stagnant at best, which means tax revenues are as well. With states so far upside down, they are going to have to find a way to fund their shortfalls. There is only one way to do that – more taxes.



Where are taxes headed in 2011? It should be more of the same at the federal level, but keep an eye on your state government. All indications are they are going to try to tax you blind.



Richard A. Chapo writes about taxes for BusinessTaxRecovery.com.