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Bush Tax Cut Extension Appears Likely

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Update 12/9: House Democrats rejected the deal, so we’ll have to see what happens from here.

Update 12/6: A deal has been made – Bush tax cuts will be extended for two years for all income levels and unemployment benefits will be extended.

It appears that a compromise on the Bush tax cuts is likely and that compromise will take the form of an extension. CNN Money quoted Senator Orrin Hatch (UT-R) as saying that neither “side” has enough votes to pass the plan they want so they’ll probably extend the cuts another two years and deal with it then. Senator Ron Wyden (OR-D) is also referenced as calling for a one year extension of the tax cuts to give Congress more time to put together a deal.

What does this mean for the tax brackets? The brackets would stay the same and the ranges would increase to track alongside inflation, as reported by the BLS. Capital gains rates would also stay the same at 0% and 15%, depending on your marginal income tax rate.

Sadly, this seems to be the modus operandi of Congress on issues like this – just take a look at AMT and how often “relief” has been extended as a stop gap measure in the waning minutes of the year.

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31 Responses to “Bush Tax Cut Extension Appears Likely”

  1. looks like we’d better enjoy the next two years then!

  2. Jeff Liang says:

    *sigh* I’m all for having more take home pay as an individual, but we need to start paying down this national debt before it becomes insolvent.

  3. zapeta says:

    I heard that the other part of the bill would be an extension of unemployment benefits, so more money spent that way. At least the unemployment benefits are actually going to people who need it.

    • Scott says:

      Unemployment benefits program time is extended. The 99 weeks are NOT extended. If you are a 99-er, you get no more.

      I’ve read this is appx. 1.4 million people, so it’s time for a few to get a job…

      I’m really surprised this proposal is going to make it. Just a few months ago, those baaaddd rich people were going to get taxed more, now they, too, will get a 2% off their first $108k. Are we getting punk’d or on the Twilight Zone 2010 edition?

      Just a reminder, I forgot we were being taxed on health insurance next year (I think). If that’s the case, my insurance is appx. $4k & my wifes is probably in the $8k range, so we’re on the hook for probably $3-4k which is probably the same as the 2% reduction on SS proposal…go figure.

      I’m envisioning a hand going into the right pocket and another hand pulling out of the left…

      • cubiclegeoff says:

        Unless something changed, health insurance is still not taxed and won’t be for most people according to current regulations.

  4. Judi says:

    Tax cuts for all = a growing economy (more people paying taxes)= more revenue for the Feds. What is the downside?

    • Ryan says:

      I’m not so sure tax cuts = growing economy.

      • Jim says:

        It’s certainly a boost, elevating it above what it would be without the cuts, but to say it will turn our economy around would be disingenuous.

        • TomM says:

          Well certainly, increasing taxes will not turn around the economy. When are people going to get it? Increasing taxes does not solve anything. Once again, how about decreasing the size of government, reducing the debt by spending less and finally, let the private sector do what it’s supposed to do in a free society……grow and create jobs. Get governments politically motivated, regulating hands out of private industry. Haven’t we learned or lesson yet? What the government did with Fanny Mae and Freddy Mac is not productive? And that is just one instance of their non-productive “sticking their nose where it doesn’t belong”. In the imortal words of Charlie Brown……good grief!

      • Mike says:

        I don’t think tax increases help either.

    • Jim says:

      The deficit is the downside.

    • cubiclegeoff says:

      At some point this may be true, but right now, it won’t make a difference.

  5. Ryan says:

    We’ll be saying the same thing in 2 years when they just extend it again because they can’t agree on anything. Do you really think are going to keep working hard on this if it’s pushed back another 2 years? I doubt it. Agreeing to disagree is not a good platform when it comes to this stuff.

  6. govenar says:

    I think government works best when it doesn’t do anything.

  7. The more they delay facing these problems, the more it’s going to hurt when it can’t be avoided anymore.

  8. Obama’s not going to put a final nail in his coffin by raising taxes. Just extend them for two years and let the next president worry about it. The economy stinks, raising taxes is a bad idea.

  9. cubiclegeoff says:

    What happened to being able to pay for any additional costs? As usual, campaigning is all words, and never lead to actions once elected.

  10. Pete says:

    For Obama he doesn’t want to be the one who allows the tax cuts to expire -and have people see their taxes go up on average of $3000. Instead he gets to look like the great compromiser, and he shows that he can work with the other side. If the economy continues to tank, he can blame it on the Republicans and the compromises he had to make. If it gets better, he can take partial credit. It’s a no lose for him.

    Of course I wish these tax cuts were hand in hand with huge slashes in the budget and spending, but of course we could never expect politicians to cut spending, and as a result – their power.

  11. Ryan says:

    Jim,

    You need to add ‘Like’ buttons to the comments. Pete hit it, probably like he did that drunk girl in college.

  12. Chuck says:

    You don’t need tax hikes to reduce the debt. Anyone who wishes to pay more may do so:

    http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm

    Some folks put a whopping $2.84M of money where their mouths are. Were you one of them?

    Oh. What’s that? You wanted someone ELSE to pay down the debt?

    (Reducing spending is always an option, too.)

  13. Mike says:

    Hopefully the debt commission’s suggestions are brought up again. We really need to change the spending and social programs of this country so the that could finally be brought down.

  14. Chris says:

    Jim,

    Weren’t you the same one in favor of the monstrosity of a health care bill? I don’t recall much in the way of criticism about the phony claims it would reduce the deficit (which, if you take a look at the CBO numbers, are contingent on a bunch of factors that everyone – liberal and conservative) knows won’t happen.

    Now, don’t get me wrong. I actually think these need to go away, if not now, then definitely in two years. The deficit is a serious problem and the debt commission was a good start.

    But the idea that these “tax cuts for the rich” are the biggest cause of our current deficit is disingenuous.

    Chuck,
    I likely mostly agree with (what I am surmising) is your ideology, but I think the idea that we can get away in the long run without any tax hikes is also wishful thinking. We’re too deep in the hole now. Can you balance the budget with no additional revenue? Sure. But it would be a very painful exercise that no Congress, even one under total Republican control, will face. So there’s going to have to be pain all around. It’s the price we pay for getting ourselves into this mess.

    • Jim says:

      Yes I was in favor but I don’t see anywhere here where I criticize phone claims of reducing the deficit? If anything, they’d be made tongue in cheek since deficit reduction was a hallmark of the Republicans during the mid-term elections last month (and this certainly isn’t a deficit reducing move). I don’t think tax cuts for the rich are the biggest cause, I think our massive spending is the cause (much of which is in defense, buying and supporting legacy systems we no longer need).

      • Chris says:

        My bad then, Jim. If you didn’t say that, then I apologize for putting words in your mouth.

        I think you’re right, by the way. There is a lot of money in the defense appropriation that is redundant and unnecessary.

  15. govenar says:

    I don’t think we can yet say “A deal has been made – Bush tax cuts will be extended…”. Congress hasn’t voted on it yet, and some Democrats might still try to make it fail. It sounds promising though.

  16. Tim says:

    the whole argument of tax cuts or not is a useless one. the bottom line comes down to what all these personal finances blogs are about: spend less than you earn. giving a tax cut means the govt earns less, which means they can’t spend as much. pretty simple stuff. the confusion comes in when folks use terms like tax cuts cost $Xbn. it doesn’t cost anything unless you are going to spend that amount. it means you can’t spend that amount anymore, so you have to look at your expenses and reduce your expenses.

    since when did a single person making $200k become rich but a married family making $250k is equally rich? I hate that difference. i also remind people of three letters: AMT. the last time we said $x was “rich” we ended up with the AMT problem.

    you reduce the deficit by either making more money or spending less than you currently make. If you decrease the amt of your revenue, then you obviously have to spend less.

  17. govenar says:

    That newer article Jim linked to sounds like this is closer to being a done deal:
    “Legislation aimed at avoiding sweeping tax increases looks headed for Senate approval after negotiators added sweeteners to promote ethanol and other alternative energies.”

  18. Grant says:

    My biggest concern with the tax extension is it doesn’t meet the PAYGO standards, therefore potentially hurting us in the long run. We keep making an inter-temporal shift of decision making to the present and putting off the consequences to the future generations. Why do our legislators keep making rash decisions like this tax cut and the health care reform. These aren’t issues that should be forced without a timely consideration yet it seems our elected officials are always in some time crunch to get a deal done thus leading to haphazard legislation. While I think we need this today, it needs to be budget neutral. Also, we only need this because many Americans overextended themselves in the last decade and haven’t saved for a “rainy” day. We have to fix the problem by Americans changing their fundamental behavior. It’s only a matter of time until we lose what power we have to the emerging countries of the likes of China and India. China is in its infancy of wealth so they have yet to see a fundamental shift of greedier consumer behavior but it is something all wealthy economies must face. We are approaching a point where our deficit is not just a financial burden but also a national security concern and we must take steps to address the problem sooner rather than later. Sadly, I think Americans have to suck it up and expect higher taxes and lower government spending to fix the problem. I just don’t think the deficit problem can be solved with one of these approaches alone. We’ve been living beyond our means for decades and it is time to address this issue. I’m 24 and I legitimately feel that by the end of my time, America will be worse than it is today because the world will recognize are inability to finance our lives without others money. That is, unless we do something about it today. Sorry to go on this tangent but I feel these issued are linked such that they warrant many different angles of analysis.


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