Auto-Repeal of the Bush Tax Cuts in 2011 – Will it only Tax the Wealthy?

I was sent a copy of the LISI Estate Planning Newsletter #1682 (August 2, 2010) at http://www.leimbergservices.com

It included some calculations that are very shocking!

For the wealthiest Americans, allowing the Bush tax cuts to “sunset” will be quite a shock. But if Congress fails to act there will be many more people who will be surprised by how much their income taxes will go up. It will not only impact rich people!

For a family of four with $250,000 of income, their tax bill is $51,701 under current law in 2010. That same family will pay tax of $59,341 in 2011, a $7,640 increase!

Reducing the family’s income reduces the impact, but the impact is still there.

For a family earning $50,000, the tax bill would be $2,763 under current law. The bill jumps to $3,878, more than $1,000 more, in 2011.

Even a family earning as little as $30,000 would be affected. That family would owe $400 in federal income tax in 2010. But if the 10% tax bracket and marriage penalty relief both expire, that family’s tax bill more than doubles, going from $400 to $878. This is more than a 100% increase for people who are at the lowest income levels!

Do not listen to politicians who call them Bush tax cuts “for the wealthy” I would suspect that any family that makes $30,000 per year does not think they should see their taxes go up more than 100% next year!