This week, I’ve asked readers to chime in on the Bush tax cuts. This guest post is courtesy of Stuart C. Wardlaw, CPA (for more on the topic, see the original post):
On January 20, 2009, the Bush Administration handed over not only the keys to the White House; but also a box full of live hand grenades.
Two of those grenades have their pins pulled and are set to explode on January 1, 2011, in the form of a resurrection of the Federal Estate Tax and the expiring income 2001 Bush Tax Cuts.
As a practical matter, we cannot afford to make the repeal of the Federal Estate Tax permanent, no matter how much screaming about the “death tax” is heard. Nor can we perpetuate wealthy dynasties – one of the original reasons the estate tax came to be. We can set a higher exemption, say $3.5 million, lower the top tax rate to 45% of the taxable estate, and remove carryover basis provisions, which would essentially return the estate tax to its 2009 existence. A compromise solution at best, but superior to the extreme alternatives facing us all.
Expiration of the 2001 Bush Tax Cuts poses a thornier problem, particularly in this Great Recession. While it is advisable to allow the top tax rates to increase; the lower rates, capital gains and dividends taxes should be held firm until the economy improves.
As a condition upon Congress, PAYGO (pay as you go – new spending would be tied to other reductions) should be enforced except in the case of national emergencies. If PAYGO is not enforced – allowing spending to increase, then an automatic tax increase should take place across the board. Such a measure would cause the voting public to pay a lot more attention to what their elected officials are doing, and may very well help in getting our Federal budget under control.
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