Tax Cuts: an Eye Opening Illustration
September 22, 2010
Recently, The New York Times printed a chart of exactly what the consequences will be of the expiration of the Bush tax cuts of 2001 and 2003 at the end of 2010. Whether or not the Democrats prevail in eliminating cuts for individual taxpayers with income (after deductions) of $200,000 and couples with $250,000, an extension of the tax cuts would be very expensive in lost revenue for the government. The Times published an estimate from an analysis by the Tax Policy Center covering who will get what if the cuts are extended. Below is a sample of that information.
For the middle 65.9% of the population, who have income from $20,000 to $199,999, if the tax cuts are extended, they will see an after tax increase in income ranging from about 2.2% to 3.5%.
For the upper 3.4% of the population, who make between $200,000 and $499,999, about 55% of the people at this income level and above would lose at least some of their tax cuts under President Obama's proposal. If the tax cuts remain, their income would go up by about 3.4%.
For those who make over $1million, about 0.9% of the population, their after tax income would go up by an average of 6.2%. On the other hand, if the tax cuts are extended, the average size of a 2011 tax cut would mean approximately $129,000. Since 2004, it is estimated that each person in this group saved, on average, $858,000 in taxes.
We will keep you updated regarding any changes to these tax cuts. If you have any questions, please contact your Perelson Weiner partner.