As we’ve seen, the estate tax expiration had an impact of the families of a number of people who passed this year. But this was a one year deal, next year if congress doesn’t fix this, the tax comes back to levels not seen in nearly a decade.
That’s not all. When Bush was in office, income tax rates were cut under two bills, the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, and the Jobs and Growth Tax Relief Reconciliation Act of 2003. Before EGTRRA, and back in 2011, will be a lowest rate of 15%, no 10% bracket. To summarize, our current rates include six tax brackets; 10%, 15%, 25%, 28%, 33% and 35% as income rises. If no extension or new tax rates are passed into law you will see a return to 15%, 28%, 31%, 36% and 39.6%. This doesn’t look too bad, but I thought President Obama promised not to raise rates on those making less than $250K. This looks like the lowest earners will see arise, doesn’t it?
The child care credit is also due to expire. This credit was raised to $1000 per child, but is due to drop back to $500. This credit phases out for a couple making over $110K or a single person over $75K. Well below that $250K, Mr President.
Next, the Capital Gain Rates, today the long term (over 1 year holding period) gains as well as qualified dividends are taxed at 15% maximum. In 2011, the cap gain rate is 20% and dividends taxed as ordinary income. Ouch.
The countdown starts, just over 4 months to go to fix the potential train wreck 2011 will bring.
Joe
President Obama said “under his plan” he wouldn’t raise rates on those making under $250k. This does not translate to, “When I am President, I will force Congress to accept my plan.” I think it is important for people to direct most of their outrage at the right source. For tax issues, this is usually Congress.
I understand, the president can have the best of intentions, but it’s congress that needs to pass the laws.
The President has also fought very hard to let the Bush tax cuts expire. I do believe most Americans should be angry at Congress, but the President doesn’t get a pass on this. He said under “his plan” and “his plan” includes letting these tax cuts expire.
When we talk about the Bush tax cuts expiring, I trusted a new plan would offer a neutral result to the under $250K group, i.e. most of us.
I understand the president’s intent, but nothing has been done yet. My post was describing what we’d return to absent any move by congress. Great article, thanks for the link.
I have doubts about what is being reported here. Here is one example of why, from the NY Times, August 10, 2010 article Study Looks at Tax Cut Lapse for Rich: “The president has vowed to extend the [Bush] tax cuts for individuals with less than $200,000 in annual taxable income and couples with less than $250,000 — about 98 percent of American households.”
President Obama has asked Congress to extend and make permanent the 10%, 15% and 25% tax rates. The 28% bracket would be recalculated to include individuals with income less than $200,000 and married filers with income less than $250,000. He is also seeking to make permanent the long-term capital gain rates of 0% and 15%, but tax capital gains at a rate of 20% for those taxpayers that fall into the 36% and 39.6% brackets.
Now, whether anyone can agree, is the catch.
Whether you like the man (George W. Bush) or not, most people would agree that raising taxes in a recession is a bad idea. If you’re one of the people who thinks it’s fine because it doesn’t affect you, think again. If you have a job (or even if you don’t) it affects you because it affects people that employ people. One way or the other, everyone pays for a tax hike.
I’m a little confused by the Democrat rhetoric on the Bush tax cuts… for almost 8 years all we heard about was “tax cuts for the rich” and “the top 1%”. Now the Democrats say they want the tax cuts to expire for the top, but not the “middle class”.
Which is it? Tax cuts for the rich, or tax cuts for all and now expiration for the rich?