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Will the Bush Era Tax Cuts Be Extended?

Written by Nickel - 28 Comments

Will the Bush Era Tax Cuts Be Extended?

In case you haven’t heard, the House of Representatives voted yesterday to extend the Bush-era tax cuts into 2011, but only for individuals making less than $200k and married couples making less than $250k. The bill passed 234-188 with strong Democratic support.

Not only would income tax rates remain unchanged for those below the $200k/$250k thresholds, but those individuals would also retain a 15% tax rate on dividends and capital gains. At the high end, however, the top income tax rate would increase from 35% to 39.6%, with the capital gains rate increasing to 20% and dividends being taxed as ordinary income.

For their part, Senate Republicans have threatened to block nearly all legislation that comes their way until the tax cuts have been extended. It seems very unlikely, however, that this particular bill will make it through the Senate, as Republicans have vowed to filibuster anything that falls short of extending the tax cuts for everyone, regardless of income.

What do you think? Should the Bush tax cuts be allowed to expire? Extended for those below a certain income threshold? Or extended for everyone?

Published on December 3rd, 2010
Modified on December 5th, 2010 - 28 Comments
Filed under: Economy, Taxes

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28 Responses to “Will the Bush Era Tax Cuts Be Extended?”

  1. 1
    BG Says:

    My order of preference:

    * Let them all expire: we have two wars to pay for.

    * Extend for those under certain threshold — I don’t like the wording, because leaving the rates unchanged for the lower brackets helps the rich guys too. Their first XX dollars will be taxed at the lower-extended rates.

    * I wouldn’t even consider extending all the tax-cuts (including the high brackets like the Republicans want): we have a $1 trillion yearly deficit, and our current tax rates absolutely can’t pay for the wars, even in a good economy.

    If they all get extended in some-kind of meaningful way (permanent like the Republicans want), then I’m going to shift my investments to be pretty heavy on ‘precious metals’ — and await the destruction of the US Dollar.

  2. 2
    Eric Says:

    Oi…don’t even get me started on the political fail that is the new Congress next year…

  3. 3
    David Stewart Says:

    The tax cuts need to be extended for all income levels. We are facing a near 1 in 5 unemployment statistic when you consider those working part-time and those who have given up their job search due to the futility. Our economy is sick and on the critical list. People earning incomes of over 250K are unlikely to be on a payroll. They usually are business owners. Business owners consider taxes an expense of conducting business and pass all taxes along to the consumer in the form of higher prices for goods and services. As Leona Helmsley so well put it, “Only the little people pay taxes.”

  4. 4
    Liz Says:

    I agree with how they extended the bush Tax Cuts as Warren Buffett the rich have NEVER had it better it’s time for them to start kicking in again. As for the tax cuts creating jobs my question is where are they ?

  5. 5
    erik Says:

    I say keep the cuts for all but the top tier. It’s an personal income tax, not a business tax. As a business owner, if you are pulling a six-figure income for yourself out of the profits of your company, you are doing just fine and can survive quite well with the top bracket regaining another 4.6 percentage points–especially when the government has gone deeper into debt ON YOUR BEHALF to keep the banking system solvent and otherwise to keep the economy from bottoming out.

  6. 6
    jim Says:

    I am guessing they will be extended for most everyone. I’m thinking there may be some sort of compromise for very high income people. Where they get a partial extension or it is extended for everyon under a high figure like $500k or $1M.

  7. 7
    Nickel Says:

    BG: Regarding your bullet point #2, I agree that the wording (mine and elsewhere) is poor, as the lower rates in lower brackets affect everyone equally, even if you make a ton of money and your top rate winds up being higher. Thanks for helping make this more clear.

  8. 8
    george withaj Says:

    I agree with the President.Keep the tax cuts for those making less than 250k.Let the them expire for the top 2%. 700 billion in 5 years would be generated by allowing the tax cut to expire for the top 2%.The lower the income the more likely you will simply spend any tax savings further stimulating our economy.
    So far it appears as the top 2% is simply holding on to their tax savings.
    While many self-employed fall into this group so do many CEO’S,Lawyers, Mortgage Bankers,and yes even our public officials that are voting for or against this plan.Trickle-Down has not worked in this economy.It’s more like Trickle-Up since the income gap continues to widen between the top 1% and everyone else.

  9. 9
    Heather Says:

    Tax cuts should be extended for all classes since higher earners can’t be punished for working hard and being successful. The representatives from the whole political spectrum need to find a way to reconcile their different views and reach a decision that would be beneficial for all of us.

  10. 10
    Patrick Says:

    I think the most important thing that needs to be done is to put something in writing so people can have time to properly plan for the future.

    I also think that they need to stop punishing investors. Dividends are not regular income, they should not be taxed as such.

    Another thing would be to eliminate the cap on social security. Why do I have to pay 6.5% on my entire paycheck because I make less than $100k but politicians, movie stars, professional athletes etc who make way millions don’t.

  11. 11
    Nickel Says:

    Patrick: The other side of that coin is that if people are expected to pay social security taxes on a larger amount of income, then they will expect to receive more in the way of benefits.

  12. 12
    Patrick Says:

    If benefits are tied directly to how much you contribute to the system then I have no problem with that scenario.

    Right now you have people living off of the system that contribute nothing to society and have never contributed anything to society.

    Not to sound completely heartless, but why should I work and be expected to pay into the system my entire life but illegals and those who decide they don’t want to work are allowed to sponge off the system? I believe in the theory of a dollar and a dollar out, right now that is not happening and that creates a riff between those who work and those who don’t.

  13. 13
    RAY Says:

    1)Extend the tax cuts for the 98% taxpayers. 2)Allow the 2% taxpayer various tax credits: a)investment tax credit of 20% on equipment mfg.or assembled in the USA for 50% or more. b)jobs credit of 20% for new hires in 2011.

  14. 14
    Ryan@theFinancialStudent Says:

    A lot of people are against raising the tax rates on the highest earners because they’re typically business owners who supposedly “create jobs”. Yet…these tax rates have been in effect for 10 years.

    So where are all the jobs that the rich were going to create thanks to lower taxes?

    I also hear Heather’s (comment 9) type of argument a lot: That high earners shouldn’t be “penalized for being successful and working hard” but then couldn’t someone earning $100,000 say that they’re being taxed unfairly for being “successful” (a completely vague measurement) compared to someone earning $50,000?

  15. 15
    Patrick Says:

    In 2001 there were 1,581,959 jobs created.

    In 2003 there were 1,559,952 jobs created.

    In 2009 there were 1,047,299 jobs created.

    All data from the US Dept of Labor.

  16. 16
    Patrick Says:

    If you go to the Dept of Labor website you can look at the number of jobs created by month for the last ten years and amazingly enough, if you look at the trailing 12 months from the 2001 tax cut there were 1,570,510 jobs created. If you look at the trailing 12 months after the 2003 cuts were implemented there were 1,564,090 jobs created.

    In the entire Bush term there were 12,752,966 jobs created for an average of 1,594,120 per year.

    In the first two years of Obama term there have been 2,218,599 jobs created. If the economy continues at this pace there will be another 1,109,299 per year leaving his first term with an estimated total of 4,437,198 jobs verse the 6,287,519 created in Bush’s first term.

    The real question is, where do we get another 2 million jobs in the next two years on top of what Pres Obama needs just to keep up his current pace?

    I still believe that setting a plan and keeping to it will do far more than debating which millionaire gets a tax break.

    Go with a flat income tax of 15%, keep all dividend taxed at 15% and set the expiration for 2025.

  17. 17
    thomas Says:

    The comments here are deep in wealth envy and misinformation.

  18. 18
    Erik Says:

    @15

    Playing the wealth envy card, are we? Makes for a pithy post, but it is ignoring the reality of the situation:

    This country has bills to pay, obligations to meet. How do you propose we meet these while reducing the country’s tax income? Please list the programs you are prepared to cut in order to offset the revenue lost by the tax breaks. Difficulty: Include dollar figures, not the generalized “cut waste and fraud” promises that got our last slate of legislators and governors elected.

    If you have a product, you sell it to people with the money to pay for it. If you have a charity, you ask for contributions from the people who have the money to contribute. If you have a government, you tax the income of those who have the income.

  19. 19
    Mike Dunham Says:

    I tend to agree with Erik, with the added observation that unless we figure out the big pink elephants like defense spending, Medicare, Social Security, etc., debating over a few million in extra tax revenues – which the richest among us will have easily figured out how to defer or avoid anyway – is not the most efficient way to spend our time.

  20. 20
    BG Says:

    #17 Mike) Social Security is funded with it’s own tax: the payroll tax. This budgetary item is easy to look at and see that it is a self-funded program, and it’s tax has brought in a surplus into the general funds coffers (over $2 trillion worth). So, take Social Security off the table.

    That leaves us with:

    Defense and Medicare (specifically part-D)

    But I agree with the premise, taxes must go up, and spending must be cut to balance the budget. The root cause of our huge debt is:

    Two wars, and massive tax cuts starting in 2001.

    You can’t go around the world fighting two wars for 10 years unless you raise taxes to pay for it. Our leaders, instead of raising taxes to fund the wars, actually lowered the taxes.

    Those are the elephants in the room, that neither party wants to acknowledge.

  21. 21
    humbeau Says:

    Taxcuts don’t make jobs. Demand does.

  22. 22
    Jay Banks Says:

    The tax cut for those higher revenue levels should not be continuous. They have acquired enough of the advantage then and still due. The money from those taxes should be used to pay down the debt.

  23. 23
    Hal Jordan Says:

    The same folks who promote deficit hysteria on the right….now want to contribute to it by borrowing 700 Billion for millioniares who dont need it?

    Great….they just save or worse – Speculate with it in Emerging Markets outside this country.

  24. 24
    bobo Says:

    Sure tax the poor people more and they’ll defiantly spit in your hamburger with that quality of life. Under 40k there should be no income tax.

  25. 25
    dede Says:

    bobo, (#24). i agree. period. i would gladly spit in the burger of 99% of the politicians who give themselves raises, take ‘breaks’ for every red numbered square on the calendar and more. those of us who don’t have jobs now, not due to our own doing, are the ones suffering, not the top 2%.

  26. 26
    Shirley Says:

    The Bush Tax cuts should not be extended for the Rich, because it was “Money, power and Wall Street”, which means the RICH.

  27. 27
    mic Says:

    First start from Spending Cuts

  28. 28
    Anonymous Says:

    I love to disseminate information that will I’ve built up with the 12 months to help enhance team performance.

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