38 • MARTIN H. RUBY
$1,500. You pay more in taxes despite your income staying the same. 12 If you don’t believe there are sneaky ways your taxes could go up, consider one of my clients, Mattie. Mattie owns a catering company. She’s very successful, catering not only weddings and special events but a growing number of corporate lunches and dinners in our community. Several years ago at tax time, Mattie discovered she owed $1,266 more in taxes than she planned. She didn’t have more in- come than the previous year, and she knew her tax bracket hadn’t changed. There had been no new tax increases announced by Con- gress. She was more than a little confused. Her accountant cleared it up for her: in the Affordable Care Act (otherwise known as Obamacare), there was a provision to in- crease the threshold for Social Security taxes. Mattie now owed Social Security taxes on a large part of her income, and, accord- ingly, her tax bill was higher. Since 2012, the federal government has raised taxes on capital gains and dividends, Medicare surtax, payroll taxes and taxes for higher earners. That’s in the last few years alone. Assuming That Risk When you save tax-deferred, you are assuming the risk of fu- ture tax rates, deductions and exemptions. You accept a large un- known in your retirement account and, accordingly, in your retirement income. I liken IRAs and 401(k)s to a ticking tax time bomb, because you don't know what the future holds. When it comes right down to it, how confident are you that the tax
12 Patrick J. Purcell. Social Security. December 2015. “Income Taxes on Social Security Benefits.” https: // www.ssa.gov / policy / docs / issuepapers / ip2015-02.html.
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