Will the Bush Tax Cuts Ever Lapse?
In June 2001, the Bush tax cuts were passed into law.
The cuts came after the war and were set to revive and stimulate the economy.
The so-called Bush tax cuts were passed in the Economic Growth and Tax Relief Reconciliation Act of 2001.
The cuts included tax reductions for the top 4 earning brackets to bring the highest income tax rate to 35% (down from 39.
6%), the elimination of the 2010 Federal Estate Taxes, a cut on the marriage penalties that came with filing taxes jointly as opposed to filing as single, an increase of the child tax credit to $1,000.
00, the introduction of a 10% taxation rate for a portion of the initial taxpayer's earnings, and the introduction of refunds for tax credits.
The Bush tax credits therefore, introduced the practice of receiving tax refund checks that taxpayers look forward to every tax season.
In 2001, taxpayers received a refund of $300.
00 for singles, $500.
00 for head of households, and the couples who filed jointly received a check of $600.
00 from the IRS.
However, to ensure that the bill passed with bipartisan support in Congress, the Bush tax cuts had a requirement that they would lapse at the end of 2010.
Come 2010, all tax stakeholders looked to the Obama Administration in anticipation to see what would become of the Bush cuts that had now become such an enduring part of the tax system.
However, mid 2010, the Obama Administration was pushed into a compromising position by the Republican side of the political divide to extend the Bush tax cuts for a further 2 years.
According to this arrangement, the Bush tax relief was to lapse at the end of 2012.
There have been various adjustments to the tax code for the 2010 to 2012 tax years, but by and large, the Bush tax cuts still remain unaltered.
The Obama Administration has made it clear that it is no longer willing to renegotiate further extensions to the Bush cuts.
They are specifically keen to remove all tax cuts that are available to the wealthy.
The "rich taxpayers" refers to those who have an income of over $250,000.
00.
However, given that 2012 is election year and the fact that the Bush tax cuts and tax refunds are well enjoyed by the public at large, tax experts are not as hopeful about the notion of reversing the Bush tax cuts.
Besides the politics and the reversal of the Bush tax cuts, there is still a further tax problem that looms.
The large government deficit still remains outstanding and there is an increasing pressure to review the current tax system to come up with ways of meeting this deficit.
The pressure of the deficit in itself may require the raising of taxes, whether through the reversal of the Bush cuts on taxes or otherwise.
The problem is, given the political climate, it may be hard to pass any law that requires taxpayers to pay more taxes.
Therefore, unless the public at large is willing to sacrifice the tax cuts and do away with the tax credits, Congress will remain stuck between pleasing the people and doing whatever it can to reverse these tax breaks.
The cuts came after the war and were set to revive and stimulate the economy.
The so-called Bush tax cuts were passed in the Economic Growth and Tax Relief Reconciliation Act of 2001.
The cuts included tax reductions for the top 4 earning brackets to bring the highest income tax rate to 35% (down from 39.
6%), the elimination of the 2010 Federal Estate Taxes, a cut on the marriage penalties that came with filing taxes jointly as opposed to filing as single, an increase of the child tax credit to $1,000.
00, the introduction of a 10% taxation rate for a portion of the initial taxpayer's earnings, and the introduction of refunds for tax credits.
The Bush tax credits therefore, introduced the practice of receiving tax refund checks that taxpayers look forward to every tax season.
In 2001, taxpayers received a refund of $300.
00 for singles, $500.
00 for head of households, and the couples who filed jointly received a check of $600.
00 from the IRS.
However, to ensure that the bill passed with bipartisan support in Congress, the Bush tax cuts had a requirement that they would lapse at the end of 2010.
Come 2010, all tax stakeholders looked to the Obama Administration in anticipation to see what would become of the Bush cuts that had now become such an enduring part of the tax system.
However, mid 2010, the Obama Administration was pushed into a compromising position by the Republican side of the political divide to extend the Bush tax cuts for a further 2 years.
According to this arrangement, the Bush tax relief was to lapse at the end of 2012.
There have been various adjustments to the tax code for the 2010 to 2012 tax years, but by and large, the Bush tax cuts still remain unaltered.
The Obama Administration has made it clear that it is no longer willing to renegotiate further extensions to the Bush cuts.
They are specifically keen to remove all tax cuts that are available to the wealthy.
The "rich taxpayers" refers to those who have an income of over $250,000.
00.
However, given that 2012 is election year and the fact that the Bush tax cuts and tax refunds are well enjoyed by the public at large, tax experts are not as hopeful about the notion of reversing the Bush tax cuts.
Besides the politics and the reversal of the Bush tax cuts, there is still a further tax problem that looms.
The large government deficit still remains outstanding and there is an increasing pressure to review the current tax system to come up with ways of meeting this deficit.
The pressure of the deficit in itself may require the raising of taxes, whether through the reversal of the Bush cuts on taxes or otherwise.
The problem is, given the political climate, it may be hard to pass any law that requires taxpayers to pay more taxes.
Therefore, unless the public at large is willing to sacrifice the tax cuts and do away with the tax credits, Congress will remain stuck between pleasing the people and doing whatever it can to reverse these tax breaks.
