Wednesday, July 07, 2010

Bush Tax Cuts Were Not Just for the Wealthy

I was reminded earlier today of what the tax implications maybe for the implementation of the Health Care Bill from earlier this year. By this excerpt of the bill

(Sec. 9002) Requires employers to include in the W-2 form of each employee the aggregate cost of applicable employer-sponsored group health coverage that is excludable from the employee's gross income (excluding the value of contributions to flexible spending arrangements).

In Lakewood's Division of Tax, I would bet they will be looking at that grossed up number to squeeze extra money out of every tax payer and every business entity in the City. When you look at it on an individual basis it may not be a lot of money, then add 10 - 20,000 tax payers it all of the sudden becomes something of boon to the budget bottom line.

Then along with that bit of information comes an article from regarding how the cost of the expiration of the Bush Tax will not only affect the wealthy, but it will affect every level of the tax paying public.

"You may have been led to believe that only individuals in the top two brackets will face higher federal income taxes when the Bush cuts go bye-bye. Not true! Unless Congress takes action and President Obama goes along, rates will go up for everyone -- not just a sliver of the wealthiest Americans. The current six rate brackets of 10%, 15%, 25%, 28%, 33% and 35% will be replaced by five new brackets with the higher rates of 15%, 28%, 31%, 36% and 39.6%. Just a few months ago, it seemed like a safe bet that Congress would make a fix to keep the existing 10%, 15%, 25% and 28% rate brackets to help out lower and middle-income folks..."

As you can see, those in the 10% tax bracket will move up to 15% and the rest will move up 3-4%. The question is, will those currently in the 15% tax bracket remain there or will they be hammered moving up to the 28% bracket.

Correct me if I am wrong didn't Obama campaign on the theory of no new income tax increases in the lower income brackets. Seems to me that is not going to be a promise he can hold if he and the Democrats allow the Tax cuts to expire.

Here is the money quote from the article:

"The Bush tax cuts don't just offer tax relief to the wealthiest Americans. They offer it to just about anyone who pays federal income taxes. Their scheduled demise next year will raise the tax bill of nearly every taxpayer, unless Congress makes changes and the president jumps on board."

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