Bush Tax Cuts

An IRS report released the day before Thanksgiving shows that the very rich had something more to be thankful for. Tax rates fell in 2010 for every income group above $500,000. And the very wealthiest – those whose incomes exceeded $10 million in 2010 – saw the biggest drop in tax rates.

Taxpayers with incomes over $10 million paid an effective federal income tax rate of 20.7 percent in 2010, down from 22.4 percent in 2009. (The “effective” federal income tax rate refers to the percentage of adjusted gross income a taxpayer actually pays in federal income tax, after lower tax rates on certain kinds of income, deductions, exemptions, and credits are taken into account.) Taxpayers with incomes between $5 and $10 million paid an effective tax rate of 24.2 percent in 2010, down from 25.2 percent in 2009.

As a Wall Street Journal blog explains: “The reason for the drop in average tax rates [among the very wealthy] is no secret. It’s the special 15 percent top rates for capital gains and dividends that President George W. Bush pushed through.” Read more »

Whether served as a side dish or not, politics always seems to wiggle its way onto the Thanksgiving table. And because your family may not agree on everything (or anything), we want you to be as prepared for them as you are for the big meal.

And now that the election is over, the public debate is all about the so-called "fiscal cliff," which refers to the combination of tax cuts and numerous other provisions set to expire at the end of December plus a series of automatic spending cuts scheduled to begin in January.

Contrary to what some commentators might suggest, however, the economy won’t immediately fall into a recession if Congress doesn’t reach agreement on all of these issues by midnight on December 31. Indeed, real and lasting damage WILL be done if Members of Congress allow misguided fears to pressure them into a bad deal that cuts programs vital to women and families and fails to make the wealthiest among us pay their fair share in taxes.

To explain what this means for you – and for Aunt Edith – below are a few key myths and facts.

MYTH: If we raise taxes on the richest 2%, it will kill jobs.

FACT: We’ve seen that trickle-down economics doesn’t work. We had much stronger job growth after President Clinton raised taxes on the wealthiest Americans than after President Bush cut them. And, allowing the Bush-era tax cuts for the richest two percent to expire would generate nearly $1 trillion in savings. This much-needed revenue would allow us to call off the looming – and draconian – automatic cuts to programs that are also scheduled to take place. Plus, it would let us invest in human capital as well as physical infrastructure. When so many Americans can't find work, it's important to support programs that create good jobs and long-term economic growth. Read more »

As the year-end expiration date for the Bush-era income tax cuts draws nearer, taxes seem to be an increasingly hot topic. So far, however, some expiring tax provisions have largely escaped media attention. These include improvements to refundable tax credits, like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), that were enacted in 2009 as part of the American Recovery & Reinvestment Act (ARRA). These credits help low- and moderate-income families, millions of whom will lose benefits if the ARRA improvements are allowed to expire – as the tax plan proposed by Republican leaders in Congress would do, even as it maintains tax cuts for the richest two percent of Americans.

The $160,000 tax break that millionaires will receive if the Bush-era tax cuts are extended next year does not include the effect of another tax cut that also has remained mostly under the radar: the 2010 estate tax cut. If this tax cut is allowed to expire on schedule at the end of the year, and the federal estate tax reverts to its 2009 level as President Obama has proposed, 99.7 percent of estates will still be exempt from the tax. Read more »