During his first term in office, George W. Bush and friends passed several different tax cuts. Bush and company could not obtain enough support to the make cuts permanent. As a result, many of the tax cuts are scheduled to "sunset," or revert back to the provisions that were in effect before the cuts were made, on January 1, 2011.
Sunsetting of the Bush tax cuts will affect nearly all taxpayers in the United States. Here is an article from the Wall Street Journal about how the expiration of some of the Bush tax cuts will be felt by taxpayers.
A few of the notables include changes to individual tax rates as well as changes to the capital gains and dividend rates. If Congress does not act then the current individual tax rates of 10%, 15%, 25%, 28%, 33% and 35% will be replaced with the higher rates of 15%, 28%, 31%, 36% and 39.6%. In addition, without Congressional action, the current 15% tax on long-term capital gains will be revert back to 20%, while the 15% dividend rate will increase to 39.6%.
One change involves the estate tax exemption. In 2009, each person could use a $3.5 million exemption to shelter assets from the estate tax, which carries with it a 45% average rate. If the Bush tax cuts sunset without Congressional action, then the exemption will revert back to a $1 million exemption and with a top rate of 55%.
In short, lawmakers must address these and many other tax issues by the end of the year. If they don't, death taxes will rise, tax rates will rise, and many tax benefits will expire.
Will lawmakers act? So far Congress has been preoccupied with healthcare reform and November elections, and according to the Wall Street Journal, Congress has fewer than 40 working days left before November with no lame-duck session scheduled. What do you think?
I think the Bush tax cuts may be going the way of the Dodo.
