Tags: George W. Bush | Barack Obama | Economic- Crisis | Tea Party | Hostetter | Bush | tax

Expiration of Bush Tax Cuts Will Affect Everyone

By    |   Thursday, 26 August 2010 04:05 PM

A real debate on taxes is long overdue.

An undercurrent of frustration, anxiety, and fear for the nation's economy has been brewing for some time.

The tea party movement and other tax protest groups are a manifestation of this concern.

A do-nothing Congress, some believe a useless Congress, languishes idly by, its leadership devoid of any original thinking or new ideas.

A public approval rating of 11 percent confirms this.

Congressional leadership in the House of Representatives and the U.S. Senate is locked in the slow-moving minds of House Majority Leader Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev. Both follow the far-left Democrat party line.

At the center of the present debate are two acts passed during President George W. Bush's administration, one in 2001 and the other in 2003. There are now called the Bush tax cuts.

The first law is The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, pronounced egg-tra).

The act made significant changes in the U.S. Internal Revenue Code, including income tax rates, estate and gift tax exclusions, and qualified  retirement plan rules.

The changes were so large and numerous that many books and analysis papers were published regarding the changes and how to best take advantage of them.

A notable characteristic of EGTRRA is that its provisions will sunset on Jan. 1, 2011, unless further legislation is enacted to make its changes permanent.

The second law of the Bush tax cuts, entitled The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) was passed by the U.S. Congress on May 23, 2003, and signed into law by President George W. Bush on May 26, 2003.

Tax cuts made in the individual rates, capital gains, dividends, and other taxes and are set to expire after 2010.

President Barack Obama has expressed interest in letting the tax cuts expire on the top 2 to 3 percent of American households, couples making more than $250,000 per year and individuals making more than $200,000 per year.

Republicans are insisting that each and every one of the tax cuts be extended indefinitely. They argue that letting the Bush tax cuts expire would be equal to levying one of the highest tax increases in history, especially during a period when the economy is barely holding on to a recovery from a recent recession.

The Heritage Foundation, a Washington, D.C. "think tank," believes the Bush tax cuts have placed more of a tax burden on the rich and the poor sharing less. President Bush is criticized for favoring the rich with lower capital gains taxes.

In actuality the low capital gains tax benefits the middle class across the board: the small businessman, the entrepreneur, and particularly the young farm family. Whatever happens to the Bush tax cuts — and it is improbable that the cuts will be extended for any length of time — the Washington tax man has some "severe" changes in store.

These new tax programs won't necessarily apply only to the rich. These programs are intended to reach lower down the income ladder than previous tax laws.

The present tax rate brackets are: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent. These will be replaced by higher rates of 15 percent, 28 percent, 31 percent, 36 percent and 39.8 percent.

Efforts were made, but unfortunately failed, to keep the lower rates in place to help the lower and middle income taxpayer.

The present rate on long term capital gains is only 15 percent. This will increase to 20 percent. The tax rate on dividends is expected to skyrocket to 39.6 percent unless action is taken to specifically limit it to 20 percent.

Perhaps the greatest blow of all comes with the new rules on itemized deductions. Unless Congress intervenes, a severe phase-out rule could eliminate up to 80 percent of a higher income individual's itemized deductions for mortgage interest, state and local taxes, and charitable donations.

This would be tragic for charities across the nation, especially those dedicated to the handicapped, who depend on high-income taxpayers to provide a substantial part of their income.

The Bush tax cuts have been criticized, mainly by the far left media, as benefiting only the rich. In reality, the demise of the Bush tax cuts will have some impact on all taxpayers.

E. Ralph Hostetter, a prominent businessman and agricultural publisher, also is a national and local award-winning columnist. He welcomes comments by email sent to eralphhostetter@yahoo.com.

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A real debate on taxes is long overdue. An undercurrent of frustration, anxiety, and fear for the nation's economy has been brewing for some time. The tea party movement and other tax protest groups are a manifestation of this concern. A do-nothing Congress, some believe...
Thursday, 26 August 2010 04:05 PM
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