Make more than $200K? Your taxes are (probably) going up

Remember all the talk after the 2012 election about tax hikes? Well, they’re here–but you’re probably going to be affected only slightly, or not at all, if you are earning less than six figures. However, once you get above $200,000 of total income, you’re almost sure to see a hike in your tax bill this year.

The most significant increases affecting higher-income earners this year include:

–The new 3.8% Net Investment Income Tax on singles with modified adjusted gross income of more than $200,000 ($250,000 for joint filers.) As Brent Hunsberger of The Oregonian points out, this tax on investment income includes real estate income. Remember that real estate income is ordinary income, so this is a 3.8% tax on top of whatever your ordinary marginal tax rate already is. (Department of Shameless Self-Promotion–Hunsberger quotes Yours Truly in his article.)

–A Medicare Tax increase of 0.9% . You are subject to this if you have wages and/or self-employment earnings of more than $200,000; $250,000 for joint filers. Note: Because employers don’t know all of your sources of income, they cannot withhold this additional tax. You’ll be reporting it yourself on the all-new Form 8959.

–An increase in the top rate on long-term capital gains and qualifying dividends to 20%, instead of 15%. This hits people with taxable income above $400,000; $450,000 for joint filers.

–An increase in the top marginal tax rate, from 35% to 39.6%. Again, only the highest earners–people with more than $400,000 of taxable income, $450,000 for joint filers–are affected.

The biggest problem for folks who are affected by all of these increases? Maybe it’s figuring out where the few people are with whom you can commiserate. As this handy-dandy calculator from Kiplinger’s shows , people with adjusted gross income for $400,000 or more are in the top 1% of income earners nationwide.

The rich really are getting richer, says Oxfam report

Oxfam International gets my award this month for masterful timing: While an assortment of the richest and most powerful people in the world were gathering for the World Economic Forum in Davos, Switzerland, Oxfam released a report on income inequality.

The report, picked up by Forbes, Slate , and others, concludes that the 85 richest people in the world have as much wealth as the poorest 3.5 billion.

Given the tremendous disparities in wealth accumulation between the first world and third world, that attention-getting ratio is kind of, sort of, maybe a bit rigged. But still.

More interesting to me is the report’s estimate that 95% of economic growth in the U.S. since 2009 has gone to the wealthiest 1% of citizens. As Forbes notes, it also quotes Supreme Court Justice Louis Brandeis, who said, ‘We may have democracy, or we may have wealth concentrated in the hands of the few, but we cannot have both.’

Alas, if you feel like you haven’t gotten ahead much in the past five years…you’re probably right.

How Oregon is helping a billionaire save some bacon on Bacon

There are two current mysteries about Francis Bacon’s Three Studies of Lucien Freud. First, who paid $142.4 million, the most ever paid for a work of art at auction, in November for the triptych? Second, why is it currently being displayed a mere three miles from my home, in the well-regarded-but-let’s-face-it-not-internationally-renowned Portland Art Museum?

Can’t help you with the first question. But the answer to the second seems to come down to…taxes!!

See, if the buyer is a collector living in a state like California or New York or Washington, all of which have high sales taxes, he could be subject to more than $10 million in sales taxes or use taxes on the purchase.

But, as gallerist Elizabeth Leach told Willamette Week’s Matthew Korfhage, if the artwork detours to the no-sales-tax state of Oregon for at least 90 days, the buyer could avoid paying sales tax altogether.

Here’s a link to Korfhage’s excellent summary of who the buyer might be and the possible reason why Portlanders can enjoy this work through March 30. By the way, I was at the museum late one day in early January and spent close to a half-hour in the room where the work is displayed. I don’t think there were more than a dozen visitors in the room at any time. Check it out, art lovers!!!

Some professional athletes are getting screwed by Tennessee taxes

Did you know you’re generally supposed to pay income tax to any state in which you earn income? Since most people only work in one state, they’ve never heard of this rule. But professional athletes are finding out about it big-time, as state taxing authorities recognize them as a nice little source of tax revenue. After all, who could possibly object to highly paid athletes kicking in a few bucks to the coffers?

Well, for some players, the tax they pay can literally be more than they earn for a game.

In the case of basketball players going to Memphis to play the Grizzlies, the state of Tennessee charges a “flat tax” of $2,500 per game. Now, for a player like Lebron James, $2,500 is a rounding error. But for someone like Milwaukee Bucks backup guard Nate Wolters, $2,500 is more than he earns for that game.

The New York Times has the whole sad story here.

Obamacare will make it easier for Americans to start new businesses

Tired of working for the man? Obamacare will help.

Over the years I’ve seen many clients eager to start their own business. They had everything they needed — a great business plan, financing, the ability to make less money while the new venture got off the ground — but they still could not quit their job, because they could not get health insurance on their own. I’ve even had clients who wanted to retire before age 65, and who had the financial resources to do it, but the reality that they could not get health insurance on their own kept them tied to jobs they no longer wanted or needed.

The Affordable Care Act, a.k.a. Obamacare, is already changing that. As The New York Times reports, people who previously were locked into their jobs because they couldn’t get health insurance on their own are now finding that they can get insurance under the new system.

A study by the Robert Wood Johnson Foundation (website ) concludes that there will be 1.5 million more self-employed people in the U.S. in 2014 because of the Affordable Care Act.

“Assuming we get the website working, it’s going to be the biggest step we’ve had in a long time in the U.S. in terms of changing the structure of the economy,” Craig Garthwaite, assistant professor of management and strategy at Northwestern University’s Kellogg School of Management, told The New York Times.

The rollout of the Affordable Care Act has indisputably been a mess at the federal level. It’s also been a mess for some states–my state of Oregon, for example, has currently enrolled exactly ZERO people under CoverOregon. (The exchanges for California to our south and Washington to our north are working–why doesn’t Oregon just hire the folks who set up websites for those states?) But over time, the website mess is going to get sorted out, and, as Paul Krugman points out in today’s New York Times, the law is going to work.

Obamacare means that people who are ready to retire can get out of the way of younger workers. And would-be entrepreneurs, whose ambitions have been stifled by lack of access to health insurance, are going to benefit.