Ok, so this time of year the most prevailing things on your mind are sugar plums, gift wrapping, traffic, and long lines at the register. But you really should be giving at least partial thought to the tax season looming right around the corner.
Bush is Back
One of the chief things of tax conscious minds everywhere is how the Democrat-dominated senate and congress are going to treat the tax cuts instituted by President Bush.
These tax relief efforts were enacted in 2001 with a second round of cuts following in 2003. The tax relief of these cuts was felt across the board. However, these cuts were never made permanent and at the end of 2010, these reductions are set to expire.
That Depends on Your Definition of 'Expire'
If the tax cuts do expire, as many are speculating they will at least in part, the tax codes will be reverted to those enforced under President Bill Clinton. A history of taxes, politics, and which political party is better, is not what troubles the American taxpayer.
The more pertinent question is: How much will the tax man be extracting from my pocket next year and how will the government spend my tax dollars? A brief overview on the graphic offers a great visual.
Many media outlets are sensationalizing the expiration of the tax cuts decrying them as the last bright and shining hope to pull America out of the depths of recession economics. Other economic experts say these taxes don't really help the poorest, most vulnerable Americans, but rather line the pockets of the richest 2% and give them more tax relief than ever.
The Bottom Line
The bottom line is that the Bush Tax Cuts do help, but it really depends on what end of the spectrum your income resides. If the tax cuts do in fact expire, families making less than $50,000 annually will be looking at a reduction of their payable taxes, with the average tax payment being $122.00 annually. Wealthier families see an increase in tax payments of $4,000.00 a year.
Does this leave you more confused than ever? Why are the tax cuts being held up as a fabulously important economic policy to preserve when the impact on individual families is negligible? No one wants to see an increase in taxes but, $4,000 is not going to make or break a family's financial back bone when spread over the course of a year. (Impulse purchases of gum, candy, fast food items, and fancy coffees adds up to nearly twice that amount annually.)
Where the real difference is seen is the impact on governmental spending. If the tax cuts expire, the governmental budget is set to soar up to all-time highs. As can be seen by the line graph at the top right, Obama's spending is already a sharp increase from past presidential budgets.
The Line Items
The national debt is at an all-time high, having increased from 233 billion in 2008 when Obama took office, to over $1250 billion in 2010.It seems like small potatoes that president Obama is pledging to reduce spending to a mere $929 in 2011, but will that promise remain if tax cuts expire, increasing the amount of money at the federal Government's disposal?
A line by line evaluation of the proposed budgets, one with tax cuts remaining in place and the other without them, is very telling. Spending increases in most of the 'wrong places,' with interest payments and pet programs bloating the budget, while necessities like infrastructure get a mere pittance in comparison.
Perhaps the Bush tax cuts aren't what they were cracked up to be for the American family, but the governmental spending problem isn't getting better without them.