Let me paint you a not-so-pretty picture:
November elections are over. Congress convenes for Lame Duck Session between Thanksgiving and Christmas. Bush tax cuts are set to expire 12/31/2012. President Obama has promised to veto any extensions of Bush tax cuts on the wealthy. Republicans must either accept a compromise allowing a tax increase on the wealthy or allow all Bush tax cuts to expire on everyone. Anyone remember the debt ceiling debacle of last summer? Do you think the Republicans and Democrats are going to agree on a compromise?
Don’t think the Bush tax cuts affected you? Think again:
2001 Tax Brackets
Bush Tax Cut Brackets
Married filing Jointly
Married filing Jointly
Sources and to see other filers’ brackets (sorry for only listing married, but trying to be concise):
Also, set to expire:
- – $1000 Child Tax Credit will revert to $500 per child
- – Marriage Tax relief – doubled standard deduction and adjusted tax brackets will revert
- – Capital Gains tax brackets of 0% and 15% will revert to 20%
- – Dividend tax rate of 15% will revert to your regular tax bracket
- – $5M Estate tax exclusion and 35% rate will revert to $1M exclusion and 55%
- – And lots more http://tax.cchgroup.com/downloads/files/PDFs/legislation/sunsettax.pdf
Why am I bringing you down?
I think there is a lot of misinformation out there and I want you to be knowledgeable and prepared. Hopefully, Congress will act so that not all these tax cuts will expire. No matter whether you think the tax cuts did or didn’t help the economy, these tax increases certainly will not help the economy; consumers will have less money to spend and the money taken out of the economy is slotted to reduce government debt. In other words, money will be taken out of the economy through higher taxes, but not put back into the economy through new government spending – this will contract the GDP. Of course, the government debt and deficit spending are out of control and are leading the US down the same path as Europe, but those are other issues!
What can you do? (Please talk to your financial advisor and accountant first!)
- – Realize capital gains while rates are low
- – Maximize your tax-deferred investments – IRA’s, ROTH’s, employer retirement plans
- – Convert IRA to ROTH while tax rates are low
- – Gift $5M now to take advantage of current exclusion
- – Contact your Congressmen to let them know how you feel about higher taxes