This week, I’m letting my readers take over and tell you what they think about the expiring Bush tax cuts. As always, I think background and context are important. So here’s a quick primer on what’s happening and why…
The so-called Bush tax cuts are a series of tax breaks which were enacted in 2001 and 2003. The cuts were heavily touted at the time as a way to kick-start the economy. The plan, as many folks understood it, was to eventually make the cuts permanent. However, neither political capital nor the economy was on the President’s side. A post 9/11 world and the costs associated with the wars in Iraq and Afghanistan came together with a tumbling economy. The GOP couldn’t muster the votes to make the cuts permanent and the Dems couldn’t organize sufficiently to offer a workable alternative. The result is that the temporary cuts enacted by Congress are set to expire at the end of 2010. I think it’s fair to say that, nearly ten years ago, nobody saw that coming.
So what kinds of breaks are we talking?
1, Federal estate tax. The federal estate tax may be gone for 2010 but it comes back in 2011 with a personal exemption of $1 million and a flat rate of 55%.
2, Capital gains tax rates. The capital gains tax rates had been capped at 15% for long-term gains with a remarkable 0% available for some taxpayers. Those rates will bump back to 2001 levels.
3, Qualified dividend rates. To encourage investment, certain dividend rates were lowered to as little as 10%. In 2011, rates for most dividends will revert to ordinary income tax rates.
4, Individual income tax rates. Under the 2001 and 2003 structures, a new tax bracket was created at the bottom and rates were lowered across the board. All rates are set to increase in 2011.
5, Relief for families. The tax breaks offered relief from the marriage penalty and an additional child tax credit. Those are slated to disappear.
That’s not meant to be an exhaustive list – just some of the highlights of the tax breaks on the books which are slated to disappear.
In this economy, making the cuts permanent would be impossible. However, letting them. Expire completely means that Obama would break his “no tax increase for the middle class” pledge. So what’s a Congress to do? Check in all week for my readers’ thoughts on the matter!
It’s a bit disingenuous of the GOP to say that Obama is raising taxes when existing law simply takes effect. The great bulk of the Bush tax cuts were handouts to the very wealthy. Folks who have to spend most of what they earn in order to support themselves and family benefited little. We were all hurt by the long-term drainage of the federal purse.
If Obama needs a “compromise” let it be to correct the marriage penalty. Otherwise, soak the rich. They’ve been enjoying the benefits without paying their fair share.
I definitely think that these should expire as soon as possible. We are in a huge deficit and it is getting very worrisome. How big can we accumulate a trillion dollar debt?
The legal definition of “middle class” should be changed yet again.
I have to go with the preponderance of U.S citizens and recommend tax cuts extended only for those with incomes less than $250,000.00
Regardless of whether the tax cuts are renewed or not there is a tremendous amount of uncertainity in the market. I believe this is a big factor in companies delaying investment decisions. Whether it is a hiring decision, capital investment, mergers, acquisitions etc. what company in their right mind would commit capital to a business plan when they don’t know what the tax structure will be 4 months from now?
Until this is settled companies will continue to sit on their cash and wait till the dust settles.
Some of us are really hurting in this recession — and liberals can say what they like, but the zero-percent capital-gains rate isn’t just for fat cats; it’s saved us a bundle, which I don’t know how we’d pay if it went away. There are very few tax breaks available to a couple with no kids; this is one of the few. But I hold out little hope of it being extended, because capital-gains is a dirty word, and anyone with that type of income obviously has money to burn, or so goes their thinking….
The preponderance of U.S. citizens pay very little or no income taxes at all. Extend the tax cuts across the board.