Below is an excerpt from a story in Reuters today. While no big fan of paying more taxes, particularly not fond of the marriage penalty, at the end of the day is this so terrible? Consider the fact that during the most productive years of growth in the U.S. the 1960-80s, the tax rates were much higher than what we will face if Congress does nothing before the end of 2012. I have said it before and will say it again, my children did not build the deficit faced in U.S. government spending. My parents did, I did, most of my readers have contributed (I hold us all responsible for the government we have regardless of whether you say I never voted for the bum). So, maybe we should pay a little extra to take care of the problem. Of course, this would beg the question of whether or not we are willing to quit spending money, or there is no real savings to be earned or payment of the debt to be found in paying an increased tax bill. And as always, this is just my two cents.
Unless both houses act by the end of the year, all of the Bush-era tax cuts and interim lower rates on estate taxes will automatically expire. Here's what might happen if Congress is deadlocked:
* On January 1, 2013, the top marginal federal income tax rate will rise more than 13 percent - from 35 percent to 39.6 percent.
* The top tax rate on long-term capital gains will go from 15 percent to 20 percent - a 33 percent increase.
* The maximum tax rate on dividend income, now capped at 15 percent, will rise to 39.6 percent - a 164 percent hike. That means dividends will be taxed like ordinary income.
* The marriage penalty would return in 2013. The standard deduction for married taxpayers would no longer be calculated as 200 percent of the amount for unmarried filers; it would return to about 167 percent of the unmarried rate.
* The estate-tax exemption is scheduled to fall from $5 million back to $1 million, while the maximum estate-tax rate is scheduled to rise to 55 percent.
---John Wasik | Reuters (1/25/12)
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