Tower Private Advisors
- Interest rates around the world go through the roof
- Tax bill signed into law
- Economy continues to grudgingly improve
When we meet with clients we often find ourselves at odds on the big picture items like inflation. Most times it’s a matter of timing, not the big picture item, itself. For example, we think inflation will be a big problem; just not for a while. One area where we firmly agree is on the subject of taxes. We both agree that they’re heading higher, and soon.
Here, then, in looking at the subject is the first of what should be several posts on the subject. It looks at the current income tax structure and what it would revert to if the so-called Bush tax cuts* are allowed to expire. While this is not particularly heavy lifting, I am using information from The Tax Foundation (www.taxfoundation.org). I have no idea which way this group leans, but it looks pretty non-partisan.
Presently, there are six income tax brackets. They’re marginal income tax brackets in that they represent the tax paid on the next dollar of income. Here are the brackets:
If the Bush tax cuts are allowed to expire the new tax brackets will look like this:
The long-term capital gains tax rate would go from 15% to 20%.
The tax rate on qualified dividends would rise from 15% to ordinary income tax rates.
* According to Miller Tabak, the Bush tax cuts are generally considered to be those from two separate acts, the Economic Growth and Tax Relief Reconcilation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. There are 69 separate provisions that are set to expire. You can see the entire list here.