President’s 2011 Proposed Budget Sets Wealthy at $190,650
The definition of a wealthy American acording to President Obama just keeps changing. In the 2008 Presidential race, then candidate Obama, stressed that those making under $250,000 would not see any tax increases. Well, folks, he lied. If you make $190,650 or more you are being targeted as “wealthy” in President Obama’s 2011 Proposed Budget. The proposed budget is filled with numerous, significant, tax increases. Most of these tax changes take effect in 2011. The purpose of this article is to highlight what those tax increases are and how they will affect you personally, as well as other provisions in the budget, both good and bad.
Tax Increases in President’s Fiscal Year 2011 Budget Proposal:
1. Tax brackets will increase from 36% to 39.6% for married couples with taxable income, after the standard deduction and two personal exemptions, of $231,300;
2. Tax brackets will increase from 36% to 39.6% for single individuals with taxable income, after the standard deduction and one personal exemption, of $190,650;
3. Reinstating the loss of itemized deductions for higher income taxpayers;
4. Reinstate the loss of personal exemptions for higher income taxpayers;
5. Limiting the benefit of itemized deduction to an effective tax rate of 28%, for taxpayers who are in the 36% or 39.6% tax brackets;
6. Increasing taxation of commodities dealers by taking away capital gains treatment on income realized from their investment transactions;
7. Punitive bank taxes imposed on the largest banking institutions to pay for TARP Losses incurred by the federal government. This bank tax would apply to all large banks, even if they did not take any TARP money.
8. No interest deduction for US corporations who borrow money that is then invested oversees;
9. Increasing capital gains tax rates from 15% to 20%;
10. Increasing taxation of dividends from 15% to 20%;
11. Bring back the marriage penalty on certain deductions;
12. Eliminating certain tax benefits for oil, gas and coal companies (no more intangible drilling expensing, enhanced oil recovery credits or percentage depletion deductions);
13. Repealing the LIFO accounting method for inventories;
14. Imposing a permanent.2% unemployment insurance surtax.
Tax reductions in President’s Fiscal Year 2011 Budget proposal:
1. New Jobs tax credit of $5,000 for 2010 only;
2. Extend bonus first-year depreciation;
3. 0% capital gains tax rate on qualified small business stock held for at least five years. Effective for such stock acquired after February 17, 2009;
4. Removing company provided cell phones from the listed property category;
5. Extending the Making Work Pay Credit for 2010;
6. Making the American Opportunity Tax Credit for higher education expenses permanent;
7. Extending through 2011 the optional deduction for state and local general sales tax;
increasing the child and dependent care tax credit for families earning up to $113,000 a year;
8. Extending the 65% COBRA premium subsidy to cover workers involuntarily terminated before 2011;
9. Expanding the Saver’s Credit to match 50% of a contribution up to $500 per individual ($1,000 for married couples);
10. Doubling the maximum credit to $1,000 per year for three years for small employers that establish a new retirement plan;
11. Making the Research and Experimentation Credit permanent.