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Fiscal Cliff – We got a parachute

Fiscal Cliff

Once again at the 12th hour a deal is reached. Over the next several days we will get more details on this deal. Here’s what I think that we have:

Bush tax cuts: The deal would extend all of the Bush tax cuts for incomes below $400,000 for individuals and $450,000 for families, while reinstating the Clinton-era 39.6 percent tax rate for income above those thresholds. It will also push the capital gains rate on investment income back to 20 percent for income above $400,000 for individuals and $450,000 for families. President Obama had asked for an extension of rates only for incomes below $250,000.

Stimulus tax credits: Three tax credits expanded as part of the stimulus will be extended for one year as part of the compromise. The America’s Opportunity Tax Credit, Child Tax Credit, and Earned Income Tax Credit collectively benefitnearly 20 million Americans each year, and extending them was a priority for Obama and Democrats. Republicans allowed all three to expire in tax legislation earlier this year. (more…)

By |2013-01-01T12:19:12-04:00January 1st, 2013|Budget, Economy, Party Politics|Comments Off on Fiscal Cliff – We got a parachute

Who's paying for the 2001 and 2003 tax cuts?

I just don’t remember folks taking to the streets and complaining about Bush’s tax cuts for the rich. I don’t remember the Tea Party folks getting all upset because these tax cuts weren’t paid for. Republicans, for the most part, were happy to vote for tax cuts for the rich with no offsets. Unemployment benefits, though, now that’s another story.

From CBPP:

The biggest changes in tax policy enacted under President George W. Bush were the 2001 and 2003 tax cuts, often referred to as the “Bush tax cuts” but formally named the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003.

What Are Their Main Features?
The 2001 and 2003 tax cuts reduced the top four marginal income tax rates (see table), as well as the tax rate on capital gains and dividends. They also phased out the estate tax, repealing it entirely in 2010.

Bush Tax Cuts

In addition, the tax cuts included three components often referred to as “middle-class” tax cuts, though many higher-income families benefit from them as well. One provision created a new bottom income tax rate of 10 percent for some of the income previously taxed at a 15 percent rate. Another provision increased the Child Tax Credit from $500 to $1,000 per child and made many low-income working families eligible for the credit. The third provision was “marriage penalty relief” — a set of changes that reduced taxes for some married couples.
Nearly all of the tax cuts are scheduled to expire at the end of 2010.

How Much Do They Cost?
The 2001 and 2003 tax cuts added about $1.7 trillion to deficits between 2001 and 2008. Because they been financed by borrowing — which increases the national debt — this figure includes the extra interest costs resulting from that additional debt.

This figure also includes the cost of “patching” the Alternative Minimum Tax to keep the tax from hitting millions of upper-middle-class households, a problem the tax cuts helped cause. (See Policy Basics: The Alternative Minimum Tax.)

Over the next decade (2009-2018), making the tax cuts permanent would cost $4.4 trillion, assuming that the tax cuts remain deficit-financed.

Whom Do They Benefit The Most?
A very large share of the value of the tax cuts flows to high-income taxpayers. In fact, the top 1 percent of households — a group with incomes over $450,000 in 2008 — would receive 31 percent of the tax cuts’ benefits over the next ten years if the tax cuts were made permanent.

By |2010-07-29T07:46:01-04:00July 29th, 2010|Bush Administration, Economy|Comments Off on Who's paying for the 2001 and 2003 tax cuts?
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