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Bush Tax Cut Extension Appears Likely

Update 12/9: House Democrats rejected the deal [3], so we’ll have to see what happens from here.

Update 12/6: A deal [4] 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 [5] 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 [6]? The brackets would stay the same and the ranges would increase to track alongside inflation, as reported by the BLS. Capital gains rates [7] 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 [8] and how often “relief” has been extended as a stop gap measure in the waning minutes of the year.