If Bush Tax Cuts Aren’t Extended, How much will it Cost You?
September 04, 2012
Early in President Bush’s first term in 2001 and 2003, Congress passedtax cuts he proposed. The Bush tax cuts had sunsetprovisions that made them expire at the end of 2010. Whether to renew the Bush-era rates hasbecome a constant flashpoint for Republicans and President Barack Obama. Obamasupports extending the rates for those who make $250,000 and less, whileRepublicans support extending the rates for all Americans. Most recently, allof the rates were extended as part of the TaxRelief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.However, this two-year extension that was part of a larger tax and economic packageis set to expire on December 31st of this year.
Currentlythe Republican controlled House of Representatives and the Democrat controlledSenate, along with the President are in a stalemate. The Senate acted first andon July 25th they passed a bill that would continue the tax cuts foreveryone making less than $250,000 a year. This would allow rates for allhigher income earners to return to the pre-Bush levels. In the first week ofAugust, the House version of the bill approved a continuation of the cuts for allAmericans.
Failing to extend the rates will have far reachingimpacts on everyone who pays taxes. Specifically, the existing 10% bracket willgo away, and the lowest “new” bracket will be 15%. The existing 25% bracketwill be replaced with a 28% bracket; the existing 28% bracket will be replacedby a 31% bracket; the existing 33% bracket will be replaced a 36% bracket; andthe existing 35% bracket will be replaced a 39.6% bracket.
What happensto you if the cuts expire? The Tax Foundation, a nonpartisan tax research groupbased in Washington, D.C., has done the math and shows the likely economicimpact on Americans in every state. You can learn more here: http://taxfoundation.org/
The FiveStates Facing The Biggest Tax Increases (avg. per household):
1. Connecticut $5,783
2. New York $5,542
3. New Jersey $5030
4. Massachusetts $4277
5. California $4242
The FiveStates With The Smallest Tax Increases (avg. per household):
1. Mississippi $1310
2. New Mexico $1465
3. Alabama $1496
4. Tennessee $1522
5. West Virginia $1530