Economic Growth & Tax Relief Act of 2001
- The largest differences seen in the IRS tax code came in the form of lower income tax rates, higher estate and gift tax exclusions, and more money allowed to be deposited into retirement plans. The legislation is scheduled to expire on January 1, 2011.
- The nation applauded the Bush tax cuts because it provided extra money into everyone's pockets when they filed taxes. A special rebate program was set up which gave single filers a $300 tax rebate; single parents received $500 and married couples received $600 in tax savings in 2001.
- Typically capital gains and estate taxes are only paid by the wealthy, and one of Bush's campaign promises in the 2000 election was to lower taxes on the wealthy. The capital gains tax is enacted on individuals who sell their ownership in investment property or stock after owning it for less than five years. As part of Bush's legislation the tax was reduced to 8 percent. The amount that an estate tax is charged at was also raised on a tier system. In 2001, the estate tax started at $675,000, at which point the government could tax it up to 55 percent of the entire property. The current rate of taxes starts at just over $1 million. Unless Congress comes up with a fix during the next legislative session, there will be no estate tax charge for 2010.
- The economic and tax relief act allowed workers over the age of 50 to add more money to their tax sheltered retirement accounts such as IRA's or 401(K) to ensure that they could "catch up."
- All provisions in the 2001 tax relief act will expire on January 1, 2011, so the current Congress has only a few more sessions to decide if the cuts will be permanent. If they choose not to act, in essence everyone's taxes will go up again, as it will be very difficult to remind people that these are the same amount of taxes that we paid prior to 2001. Also, the Alternative Minimum Tax (AMT) rate, an older provision in the tax code that stopped the wealthy from taking too many deductions, has begun to affect some middle-class families. This rate was not readjusted when the tax cuts came into place. Congress will need to decide if they are going to raise the AMT to prevent the middle class from paying in this tax bracket.
