One of the great national pastimes for people from all nations is to talk about their country’s tax situation. In the U.S. there is no shortage of public and private debate on what lies ahead for income taxes.

While it’s impossible to know for sure what what’s going to happen to taxes, it might be a good exercise to reflect on the past year to review what just happened.

Many tax attorneys will tell you changing the tax code is tantamount to open heart surgery. That’s why after all the tax code changing rhetoric dies down, tax rates…and not tax codes are changed.

Based on last year’s tax rate changes, it is estimated more than 75% of Americans saw a tax rate increase in 2013. It is no surprise the wealthiest American’s got hit the hardest. Consider two major components of last year’s legislation that affected tax rates:

1) The payroll tax break ended. For the past two years, the Social Security payroll tax was lowered by two percentage points, from 6.2 to 4.2 percent. If you are self-employed, you now pay 12.4%.

2) The highest tax bracket increased. The tax rate for individuals who earned more than $400,000 and couples making over $450,000 increased to 39.6 percent. That means if you made $1 million last year you paid $122,560 more than you did on the same income the year before. In addition, capital gains taxes went up to 20 percent on high income earners and a 3.8 percent increase was levied on certain levels of investment income. High earners also saw limitations to their exemptions and deductions.

High-earning taxpayers are also paying more for Medicare under the Affordable Care Act. For the first time ever, investment income is now subject to Medicare taxes. Other changes included a $2,500 cap on flexible spending account contributions.

While no one except perhaps a few government officials know for sure where taxes are headed…it would serve us all well to remember the famous aphorism…The best predictor of future behavior is past behavior. Unfortunately that applies to government tax policy as well.

Call or email us today if you want a free no-obligation second opinion on your recent tax filing to see if you overpaid in 2013 . . .and what you can do to better control your tax bills going forward.