Even as President Obama pushes for more taxes to ease the government's pain of spending cuts, one of the nation's biggest investment houses and home to millions of workers' 401k plans is warning that the last wave of taxes OK'd in Washington is about to whack the bottom line of American wage earners.
Fidelity Investments just issued an analysis of the tax changes in the fiscal cliff deal approved at the beginning of the year that says even the vast number of Americans who didn't lose their Bush-era tax cuts will feel pain.
"Rising rates and reduced deductions will impact investors' bottom line," says Executive Vice President John Sweeney in a note to investors.
"For taxpayers making less than $400,000 a year, or $450,000 for married couples filing jointly, your income tax rates won't go up in 2013. But other taxes very well could. The payroll tax will return to its pre-2011 levels--a 2% increase in most cases. And a range of other tax rates will be going up for high income earners including dividend taxes, capital gains, and estate taxes. These come on top of a new 3.8% Medicare surtax and net investment tax that affects taxpayers with modified adjusted gross income of more than $200,000 (single) and $250,000 (joint)," said the mutual fund powerhouse.
The new Medicare surtax will hit the wealthy, said Fidelity. "For investors with modified adjusted gross income greater than $200,000 (single filers) or $250,000 (married filing jointly) the new 3.8% Medicare surtax on net investment income is going to impact capital gains and dividends. Earners with taxable income greater than $400,000 (single), or $450,000 (married filing jointly), will pay a top rate of 20%--23.8% including the Medicare surtax," said the investors note.
And, they warned in the guidance, more could be coming to hurt investors' bottom line.
"The fiscal cliff deal helped to avoid the immediate impact of tax hikes and spending cuts, but it did little to answer the long-term deficit reduction, tax reform, and spending questions. There is much work ahead in Washington."