Wednesday, October 20, 2010

Extending Bush Tax Cuts Won't Rescue Economy

Unless Congress acts immediately on its return from the election recess, the average American family is in for a whopping rise in taxes.

Incumbent U.S. Representative Chet Edwards has gone on record saying that he favors an immediate extension of the tax rate decreases instituted in 2001 and 2003 under the Bush Administration.

Extension of the Bush tax cuts won't save the American economy, according to David Stockman, former budget director under President Ronald Reagan.

His prediction, made day before yesterday in an interview he gave Fox News, is that the congressional picture will darken, a term of partisan impasse will result in which neither side is able to take positive direction, and the nation will be forced to issue as much as $100 billion per month in bonds to keep pace with the national debt, the spending deficit, and inflation.

A coalition of Republican congressmen have a different plan, one that would involve automatic extension of the tax cuts instituted in 2001 and 2003 under the Bush Administration.

Such pundits as William Ahern of the Tax Foundation predict that under the Obama Administration, the only tax that will revert to what it was before 2001 is the top income tax rate.

The top tax rate will revert from 35% to 39%.

For the family of four bringing in a combined income of $75,000, the expiration of all Bush-era tax cuts will amount to a tax increase of $2,143 next year, according to the Tax Foundation's 2011 Income Tax Calculator.

If allowed to expire, the taxes that will immediately come to the attention of families are:

The two marriage penalty elimination provisions will expire, making the standard deduction for married couple to fall, no longer double that which is given single filers, a ceiling of 15%, double that of the rate allowed sigles;
The 10% tax bracket will expire, reverting to 15%
The child tax credit will fal from $1,000 to $500
The tax rate on long-term capital gains earned by middle and upper-income people would rise from 15% to 20%
The tax rate on qualified dividends earned by middle and upper-income peole would rise from 15% to ordinary wage tax rates
* The 28% rate would rise to 31%
* The 33% rate would rise to 35%
* The 35% rate would rise to 39.%
* The pep and Pease provision would be restored with an exemption level of $1 million and rates that top out at 55%
Estate tax law will revert to 2009 instead of 2001 with an exemption of $3.5 million and a top rate of 45%
* Rate on long-term capital gains will revert to 2001 law with a rate of 20% but only for couples with over $250,000 in adjusted gross income and a $200,000 threshold for singles
* Dividends will be taxedd just like long-term capital gains
* The PEP and Pease provision will be restored, rescinding from high-income people the value of some exemptions and deductions, but the income threshold where they start to pay more will shift up to $250,000 in taxable income couples and $250,000 for singles

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