Here's something fun to do this weekend. Figure out just what your tax bill will be next year with or without the current tax laws.
The Tax Foundation has created a calculator that will let you compare your 2011 federal income tax liabilities under three possible tax collection scenarios.
At MyTaxBurden.org you can look at your potential IRS bill if:
- All Dubya's tax cuts expire completely at the end of this year,
- Those current tax laws are all extended into 2011 or made permanent, and
- Obama's budget, which includes a combination of some tax laws expiring and other continuing, is adopted.
When you click over to the calculator (after you finish reading this, of course!), don't be freaked out by all the boxes. All you have to deal with is the far left column.
That's where you type in basic information — filing status, you wage income and number of dependents — along with, if you want, some more details, such as capital gains and dividend income, state and local taxes paid and other itemized deductions.
Then click calculate and you get the good or bad news, depending upon your dollar entries and your political leanings.
The down and dirty numbers for the hubby and me indicate that if Dubya's tax cuts are allowed to lapse, we'll owe the IRS $4,840 more in 2011.
However, if the Obama budget options were implemented, our 2011 tax liability would be $660 less than if the expiring laws were extended.
So from a bottom line perspective, we're for the current prez's proposals.
What's really going to happen? The tax burden calculator is a fun exercise, but the reality is that things on Capitol Hill are rarely either-or. Right now, the most likely outlook is that some of the expiring tax provisions will be continued and some won't.
At a meeting yesterday with reporters, Treasury Secretary Timothy Geithner said the Obama Administration plan is to let the tax cuts for the wealthiest Americans expire
on schedule.
That means a 39.6 top rate next year, compared to 35 percent right now.
That also would mean that the top tax rate on capital gains and qualified dividends would go up, from 15 percent to 20 percent.
However, nagging economic concerns have thrown a kink into the tax increase plans, at least on Capitol Hill and in campaign offices across the country.
A lot of lawmakers, primarily Republicans but also some Democrats, are concerned that increasing taxes on anybody could undermine the recovery. Even Federal Reserve Chairman Ben Bernanke told lawmakers Thursday that we "should
maintain our stimulus in the short term" and that extending the existing tax cuts "is one
way" of doing that.
So while numbers are crunched, both economic calculations and political polling data, look for the debate to continue, not only on the sunsetting tax laws, but also on the estate tax and the always exciting extenders.
You can get an idea of the major tax provisions that are on the table in my earlier post, Bush tax cuts to get Senate hearing.
This PowerPoint also provides a broad overview of the current tax issues. When I created it in January, I didn't think the whole presentation would still be pending seven months later. OK, I spent almost 20 years in Washington, D.C., so I knew some legislation would still be undone this summer, but all of it still pending is pretty impressive and not in a good way!
And sadly, I suspect that earlier predictions that Congress will put off dealing with the expiring tax laws until after the midterm election is true.
In the meantime, though, you can run your personal 2011 tax bill numbers and see what the various tax law options will do for you. That might help you decide what choice you want to make when you go to the polling booth on Nov. 2.
Related posts:
- Tax cuts or total tax reform?
- Bush tax cuts to get Senate hearing
- Is it time for tax reform?
- 2010's expiring tax cuts likely to be dealt with by a lameduck Congress
- How to raise $1.9 trillion in taxes
- Today's taxes aren't too bad
- Federal tax law changes (PowerPoint)
- A look back at the decade in taxes
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John Kelly
I have to take issue with your characterization and preference of the Obama budget options. Indeed if your tax liability is $660 less under Obama’s budget, that is due in large part to the fact that the the Obama budget proposes extending 80% of the Bush tax cuts – evidently the same Bush tax cuts that benefited you by about $48,400 over the last 10 years.
Kay
I understand that, John, and am, in fact, a bit baffled as to why Dubya’s cuts wouldn’t be better for us in all instances, given that we have quite a bit of investment income. Perhaps our other ordinary income would offset that. I guess that means I need to take a hard look at all the specific numbers, eh? 😉 But the numbers as calculated by the Tax Foundation calculator are what they are.
John Kelly
I have no issue with the numbers. In fact I think you shed important light on what will be the political context of the extension of the Bush tax cuts this fall. The Obama budget (and Congressional Democrats) propose extending tax cuts for the middle class. In annual terms, about $260 billion per year (just middle class, not including capital gains and dividends). About $60 billion is attributable to Obama’s making work pay credit. The rest is Bush’s 2001, 2003 tax relief. Allowing rates to expire for those over $250,000 is about $67 billion a year. Your $4,840 calculation is about the average middle class tax savings under the current Bush tax rates which President Obama supports. What do you think has benefitted the middle class more over the past 10 years? The $600 worker credit or the $4,800 tax cut? That’s the $200 billion question.