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Year End Taxes and the American Taxpayer Relief Act (ATRA)

Posted on 09, Dec, 2013

The American Taxpayer Relief Act (ATRA) saw a very rare event occur in US political history - a genuinely bipartisan decision which was in the best interests of the entire country, in more ways than one. The ATRA was brought into being to bring balance back to the economy and to put more money back into the pockets of those who needed it the most (i.e. the middle classes). The American Tax Relief Act was what had to happen at the end of several years of tax cuts for the wealthy under the Bush Administration, and several years of overseas warfare too.

The focus of the ATRA is on adjusting the tax code so that it actually favors the struggling middle classes, while simultaneously imposing taxes on wealthy citizens who can actually afford a series of minor income tax increases. Under the Bush Administration the wealthy received numerous tax breaks while the rest of the country struggled to get by, something which the ATRA changed while also providing a framework for actual economic growth instead of just juggling figures to please the masses.

Middle Classes

By some estimates the American Tax Relief Act reduced the amount of tax the average American family was expected to pay each year by around $2,200. This wasn't just a political move either, because the tax breaks for middle class families are permanent, including essential credits like the Earned Income tax credit and the Child Tax Credit. These credits alone provide huge financial relief for families just trying to pay their bills each month.

Alternative Minimum Tax

This act also resolved the ongoing issues with the AMT and the fact that most people simply couldn't understand what this tax was, how it worked and why they were expected to pay a higher level of tax than was originally estimated.

Wealth Taxes

As we've already mentioned the Bush Administration was very fond of giving tax breaks to people who are earning over $250,000 per year, regardless of whether or not they actually needed them. Under The American Tax Relief Act people earning more than $250,000 per year were expected to pay an overall tax rate of around 19%, while those earning more than $400,000 per year are expected to pay a tax rate of roughly 25%. From an economic point of view this makes better sense because imposing punitive taxes on families earning minimum wage simply can't contribute to economic growth or deficit reduction. 

In addition to increases in the base level of taxes on wealthy people other tax benefits created solely for the wealthy are slowly being reduced, while tax on the estates of the wealthy has increased from 35% to 40%.

Economic Growth Incentive

The real key to reigniting a faltering economic is job creation, which can only be achieved by encouraging businesses to grow. To that end the American Tax Relief Act provides companies with the kind of financial incentives and tax credits they need to create new employment opportunities, while also being able to write off some capital expenses during 2013 alone. In addition to this the ATRA also provided businesses involved with renewable energy the Production Tax Credit to further boost their growth, driving down the reliance of the United States on imported energy "products". 

Incentives in Education

The American Opportunity Tax Credit, as it became known, provides any eligible person who wishes to attend college with a tax credit of up to $2,500, which automatically reduces the financial strain preventing many American citizens from attending college in the first place.

The American Tax Relief Act has the ability to not only provide middle class families with a better standard of living, but it also has the goal of reducing the national deficit by US$1 trillion by 2022. 

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