Is your federal income tax going up—or down—in 2011? For the last several months, it’s been hard to escape the public squabble between the Obama Administration and congressional Republicans over whether or not to extend the “Bush Tax Cuts,” which are set to expire on December 31.
If you’re like me, you’ve had enough of the political blather this election season. The Bush Tax Cuts, enacted under the Bush Administration in 2001 and 2003, reduced tax burdens for married couples, families with children, and low-income households. They also increased existing tax credits, including those for education. In total, the Bush Cuts reduced tax rates on all sorts of income, including dividends and capital gains from investments. President Obama wants to extend most of Bush’s reductions but only for individuals who earn less than $200,000 (and families making $250,000 annually). Republicans want the tax cuts extended for everyone.
The first political showdown of 2011 is likely to be over the Bush Tax Cuts, which is why today’s elections are so important. There are three possibilities for the outcome: 1) Congress and the Administration will do nothing and the tax cuts will expire; 2) Republicans will get their way and extend the cuts; or 3) the Obama White House will get its way and increase taxes, but on wealthier families and individuals.
Republicans and Democrats are tossing around accusations about how both proposals will affect you and me. But at this point, all I really want to know is: “Will my taxes be higher in 2011?”
For months now, I’ve had trouble making sense of the claims from Democrats and Republicans on the Bush Tax Cut issue—until I recently discovered this tax calculator built by the Tax Foundation, a non-partisan tax education group. Plug in your income, number of dependents, and other data, and the site tabulates your expected 2011 tax burden under each of the three possible scenarios being debated (as well as under a separate congressional Democrat plan).
If tax anger determines who you’ll vote for on November 2nd, don’t go to the polls without first calculating the taxes you’ll owe under Democratic and Republican plans.Without giving away too much of my personal particulars, here’s how the calculator told me: My 2011 taxes would be highest if Washington lets the cuts expire. My burden would be lowest under the Obama proposal. Which plan is better for you?