The Homa Files

Too bad they’re a diminishing breed …

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Excerpted from IBD: New Tax Math: Single Moms + Big Brother, 04/23/2010

The news that the U.S. has become a two-class society — i.e., half of Americans pay federal income taxes and half don’t — has been bouncing around the media and shocked some Americans who had no knowledge of this appalling economic fact.

Married taxpayers pay 75% of all federal income taxes, whereas two-thirds of single parents who file as head of household pay no income tax at all.

In 2008, 40.6% of children born in the U.S. were born outside of marriage; that’s 1,720,000 children …  7% of those babies were born to girls under age 18 … over three-fourths were born to women over 20.

LBJ’s Great Society set up a  system whereby millions of people were taught they had an “entitlement” to pick the pockets of law-abiding, taxpaying families if they met two conditions: They didn’t work, and they were not married to someone who did work.

Now, about 40% of Americans receive federal government handouts of cash and valuable benefits …  20% of Americans get 75% of their income from the federal government and another 20% get 45% of their income from the government.

Obama’s stimulus law will add nearly $800 billion in welfare spending over the next decade.

That means $22,500 for every poor person in the U.S., which will cost over $10,000 for each family that pays federal income taxes.

Full articler:
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=531278

Obama mocked Tea Partiers, saying that they should be thanking him. 

President Barack Obama struck a hyperpartisan note Thursday, telling Democrats that he was “amused” by the Tax Day Tea Party rallies. 

Obama, addressing a Democratic National Committee (DNC) fundraiser in Miami, did little to endear himself to the Tea Party groups protesting around the country, saying:

 “”I’ve been a little amused over the past couple of days where people have been having these rallies about taxes …they should be saying thank you”  because of the tax cuts he has signed into law. 

‘You Would Think They’d Be Saying Thank You’, April 16, 2010
http://thehill.com/homenews/administration/92625-obama-amused-by-tea-party-rallies 

click for video:
http://tinyurl.com/y3a88zf 

Oh really ?  

His rationale: he cut taxes for 95% of Americans. 

Give me a break, please. 

First, the tax break he was selectively talking about was a whopping dollar-a-day refundable tax credit that was part of the Stimulus package. 

Second, most of it went to the people who don’t pay income taxes anyway.  Those folks are already saying thank you … when they’re not saying “gimme, gimme, gimme” 

Third, the dollar-a-day program is more than offset by $670 Billion in enacted tax increases, about 1/2 of which hits folks reporting less than $200,000 in income … that works out to about $2,100 per citizen, and $4,200 per taxpayer collected by 16,000 additional IRS agents. 

According to a Ways and Means Committee staff analysis:

“The list of $670 billion in tax increases includes at least 14 violations of the President’s pledge not to raise taxes on Americans earning less than $200,000 for singles and $250,000 for married couples.”

This specific group of tax hikes totals $316 billion over 10 years.

http://www.house.gov/budget_republicans/press/2007/pr20100415whereisbudget.pdf

As RealClearPolitics opined:

President Obama just can’t help himself from playing the Comic-in-Chief and ridiculing his opponents.

It’s good for a laugh from the partisan crowd, sure, but it often comes across to average folks (and, of course, to the opposition) as petty and/or unpresidential.

That’s not … what the public might expect from a President who promised to rise above petty partisan politics.

http://realclearpolitics.blogs.time.com/2010/04/16/obama-may-not-be-so-amused-in-november/

“Paying taxes is strictly voluntary” … so says Harry Reid

Don’t you feel silly for sending in a check yesterday ?

It makes me shiver to think that this guy is the second most powerful person in the country (after Nancy Pelosi)

This is worth watching …

http://www.youtube.com/watch?v=R7mRSI8yWwg

“Paying taxes is strictly voluntary” … so says Harry Reid

Don’t you feel silly for sending in a check yesterday ?

It makes me shiver to think that this guy is the second most powerful person in the country (after Nancy Pelosi)

This is worth watching …

http://www.youtube.com/watch?v=R7mRSI8yWwg

Last week, there was a flurry of news activity over a report that nearly half of all U.S. households will pay no federal income taxes for 2009.

It was treated as new news.  Geez.

Homa Files were all over this as far back as July 31, 2008. 

For all the wonky facts & a complete analysis see:
Under Obama, Tax Payers Will be a Minority !
https://kenhoma.wordpress.com/2008/10/28/under-obama-tax-payers-will-be-a-minority/

Note: This is the Homa Files post with all-time record for most hits.

 I hate to be an “I told you so” (yeah, right) … but hears the AP report … almost 2 years later.

As President Obama likesto say “Elections have consequences”.

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Excerpted from AP: Nearly half of US households escape fed income tax, April 9, 2010

The federal income tax is the government’s largest source of revenue, raising more than $900 billion — or a little less than half of all government receipts .

So, Tax Day is a dreaded deadline for millions, but for nearly half of U.S. households it’s simply somebody else’s problem.

About 47 percent will pay no federal income taxes at all for 2009 … up from 38% in 2007.

Either their incomes were too low, or they qualified for enough credits, deductions and exemptions to eliminate their liability.

In recent years, credits for low- and middle-income families have grown so much that a family of four making as much as $50,000 will owe no federal income tax.

Tax cuts enacted in the past decade have been generous to wealthy taxpayers making them a target for President Barack Obama and Democrats in Congress.

Less noticed were tax cuts for low- and middle-income families, which were expanded when Obama signed the massive economic recovery package last year.

The result is a tax system that exempts almost half the country from paying for programs that benefit everyone, including national defense, public safety, infrastructure and education. It is a system in which the top 10 percent of earners paid about 73 percent of the income taxes collected by the federal government.

The bottom 40 percent, on average, make a profit from the federal income tax … the government sends them a payment. Not just a refund of of excess withholding — so-called “refundable credits”.

“We have almost 50 percent of families who are getting something for nothing.”

Some of the blame goes to former President George Bush.  In 2008, he signed a law providing most families with rebate checks of $300 to $1,200.

Last year, Obama signed the economic recovery law that expanded some tax credits and created others.

Obama’s Making Work Pay credit provides as much as $800 to couples and $400 to individuals. The expanded child tax credit provides $1,000 for each child under 17. The Earned Income Tax Credit provides up to $5,657 to low-income families with at least three children.

There are also tax credits for college expenses, buying a new home and upgrading an existing home with energy-efficient doors, windows, furnaces and other appliances.

Many of the credits are refundable, meaning if the credits exceed the amount of income taxes owed, the taxpayer gets a payment from the government for the difference.

Obama has pushed tax cuts for low- and middle-income families and tax increases for the wealthy, arguing that wealthier taxpayers fared well in the past decade, so it’s time to pay up. The nation’s wealthiest taxpayers did get big tax breaks under Bush, with the top marginal tax rate reduced from 39.6 percent to 35 percent, and the second-highest rate reduced from 36 percent to 33 percent.

But income tax rates were lowered at every income level. The changes made it relatively easy for families of four making $50,000 to eliminate their income tax liability.

Here’s how they do it, according to Deloitte Tax:

The family was entitled to a standard deduction of $11,400 and four personal exemptions of $3,650 apiece, leaving a taxable income of $24,000. The federal income tax on $24,000 is $2,769.

With two children younger than 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly.

The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax. That ought to take the sting out of April 15.

Full article:
http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0&.v=1

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Why it matters 

The Tax Foundation — a nonpartisan tax research group – has repeatedly warned that 

“While some may applaud the fact that millions of low- and middle-income families pay no income taxes, there is a threat to the fabric of our democracy when so many Americans are not only disconnected from the costs of government but are net consumers of government benefits.

The conditions are ripe for social conflict if these voters begin to demand more government benefits because they know others will bear the costs.” 

 http://www.taxfoundation.org/research/show/1111.html

Here’s probably the quirkiest part of the selective expiration of the Bush tax cuts that Obama has baked into his budget …

Obama repeatedly promised that individuals earning less than $200,000 — and families earning less than $250,000 wouldn’t see their taxes go up by as much as a dime.

Think about that for a second …

Let’s pretend there’s an unmarried couple (boyfriend and girlfriend, or any other combination) with each individual earning $200,000.

As individuals, if Obama keeps his pledge,  they incur no additional income taxes in 2011 when parts of the Bush tax cuts are allowed to expire, and no additional “payroll taxes” in 2013 when the ObamaCare surcharge goes into effect.

But, if the couple is married and files jointly, they’d have $400,000 of family income and officially be reclassified as “rich people” … uh-oh !

By my count, their marriage penalty would be over $23,000.

Their “base” income taxes would go from $102,285 to $118,340 —  an increase in their effective tax rate from just over 25% to 30%.

Plus, they’d be slapped with the 3.8% payroll tax on all income over $200,000.  That tacks on another $7.600.

That makes their total income tax bill $125,940 — 23% higher than if they were unmarried and filing as individuals.

Now, that’s a marriage penalty !

In a prior post, we walked through the impact if Obama selectively lets the parts of the Bush tax cuts expire in 2011 — those parts that effect individuals earning more than $200,000 and couples earning more than $250,000.

In a nutshell, here’s what we concluded …

• The tax rate on capital gains will go up 5% … and the tax rate on dividends will go up at least 5% (to the capital gains tax rate) and maybe all the way up to ordinary income tax rates.
• For ordinary income, the effective (not marginal) tax rate increase on ordinary income will be about 1/2% for each $100,000 of taxable income (i.e. ordinary income plus dividends and capital gains) over $200,000.

For example, assume a couple has $200,000 in taxable ordinary income and $100,000 in dividends and capital gains, giving them total taxable income of $300,000.   Their tax hit will be about $6,000 — $5,000 from the increase in dividend and capital gains tax rates (5% X $100,000) and $1,000 from the increase in the effective rate on ordinary income ($300,000 minus $200,000 = $100,000 => 1/2% rate increase times $200,000 = $1,000).  In rough numbers, their income taxes would go from $67,000 to $73,000 — an increase of almost 9% — and their effective tax rate would go from 21% to over 24%.

But, that’s only part of the story.

Remember that the original Senate bill funded roughly 1/2 of ObamaCare from MediCare cuts and roughly 1/2 from an excise tax on employer provided Cadillac health insurance plans — a plan originally teed up by Obama.  When the unions marched on the White House and reminded the President who got him elected, Obama recalibrated upward the threshold defining a Cadillac plan, delayed the implementation of that tax until 2018, and replaced the lost tax revenue with a supplemental 3.8% payroll tax on AGI (Adjusted Gross Income — which includes ordinary income plus dividends and capital gains) over $200,000 — starting in 2013

Technical note:  The base Medicare tax rate is currently applied as a payroll tax on so-called earned income.  Employees pay 1.45% and employers are required to match the 1.45% — for a total of 2.9%.  Under ObamaCare, for “unearned income” — mostly dividends and capital gains — there is no employer per se, so the taxpayer is charged the full 2.9% base … plus, a supplemental .9% was added on for good measure — raising the total to 3.8%

So, comparing 2013 to the current tax rates

• The tax rate on capital gains will go up 5% … and the tax rate on dividends will go up at least 5% (to the capital gains tax rate) and maybe all the way up to ordinary income tax rates.
• For ordinary income, the effective (not marginal) tax rate increase on ordinary income will be about 1/2% for each $100,000 of taxable income (i.e. ordinary income plus dividends and capital gains) over $200,000.
• There is a 3.8% “payroll tax” on all AGI over $200,000 — that includes ordinary income plus dividends and capital gains.

Let’s rework our example …

Again, assume a couple has $200,000 in taxable ordinary income and $100,000 in dividends and capital gains, giving them total taxable income of $300,000.

Their tax hit (versus 2009) will be about $9,800 …

• $5,000 from the increase in dividend and capital gains tax rates (5% X $100,000)
• $1,000 from the increase in the effective rate on ordinary income ($300,000 minus $200,000 = $100,000 => 1/2% rate increase times $200,000 = $1,000).
• $3,800 in additional “payroll taxes” ($300,000 minus $200,000 = $100,000 times 3.8% = $3,800

In rough numbers, their income taxes would go from $67,000 to $76,800 — an increase of almost 15% — and their effective tax rate would go from 21% to over 25.5%.

Keep in mind, that this is just Federal income taxes.  Add on another 5% to 10% for state and local income taxes … then draw your own conclusions re: fairness and effect on the economy. …

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Here’s a handy tool for estimating effective tax rates now, and prospectively in 2013.

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Next up: The triumphant return of the marriage penalty

>> Current Posts

OK, what’s the effect if Obama lets the Bush tax cuts expire? Big hurt or little hurt ?

Here’s a first cut …

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Base Case

Assume a married couple earning a combined $250,000 in taxable income.  Their tax liability based the 2009 tax rate schedule would be $60,320 — an effective tax rate of 24%. 

Literally reverting back to the pre-Bush 2000 tax rate schedule, they’d owe $73,048 — a 29% effective tax rate — and a 21% increase over the current tax rates.

That’s a big hurt … and probably an unlikely worst case scenario.

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Likely Obama Plan

Remember that Obama has often said “not a dime more in taxes for families making less than $250,000″ … and sometimes said the same for individuals making less than $200,000.

In fact, according to the Tax Foundation, the plan outlined in the Obama administration’s budget is to allow:

• The top tax rate to revert from 35% to 39.6%. 
• The 33% tax rate to revert to 2001 law (rate of 36%) but the income threshold where that bracket starts will shift up to $250,000 in taxable income (couples) and $200,000 for singles
• The rate on long-term capital gains to revert to 2001 law (rate of 20%) but only for couples with over $250,000 in AGI the year the gain is realized ($200K threshold for singles)
• The rate on dividends to be hiked to long-term capital gains rates, i.e. up to 20%, but below ordinary income tax rates.

  Excerpted from Tax Foundation: Fate of Bush Tax Cuts Uncertain As Expiration Approaches, March 25, 2010   http://www.taxfoundation.org/research/show/26062.html

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If the Tax Foundation is right, here’s what the brackets would look like for married couples per the Obama budget:

If Obama keeps his word on this one, our illustrative couple earning $250,000 won’t pay higher income taxes.

What about their friends who earn more and have more wealth to spread around ?

Well, a couple earning $500,000 would have their tax liability go from $137,500 (an effective tax rate of about 27.5%) —  to $150,000 (an effective tax rate of about 30%) — roughly a 9% increase in their taxes paid.

Draw your own conclusion whether that’s a lot or a little …

Note: This is only the increase due to the tax brackets shift if the Bush tax cuts are allowed to expire … it does not consider:

• The impact of the likely increase increase in the capital gains tax rate (from 15% to 20%), or the increase in the dividends tax rate (from 15% to either 20% or the ordinary income tax rate)
•  … or the triumphant return of the marriage penalty (on steroids this time)
•  … or the 3.8% payroll tax surcharge on AGI over $200,000 (including dividends and capital gains)  to be added in 2013 to pay for ObamaCare. 

I’ll cover capital gains and dividends below … and  the marriage penalty and ObamaCare payroll tax surcharge in subsequent posts.

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Estimating your tax hit

Here are some back-of-the-envelope ways to ballpark how much more you’ll be paying in income taxes in 2011 …

If your taxable income (AGI minus deductions) is less than $200,000 (individuals) or $250,000 (couples) — and if Obama keeps his campaign pledge — then your income taxes won’t go up.

If taxable income is over the thresholds …

The tax rate on capital gains will go up 5% … and the tax rate on dividends will go up at least 5% (to the capital gains tax rate) and maybe all the way up to ordinary income tax rates.

For ordinary income, the effective (not marginal) tax rate increase on ordinary income will be about 1/2% for each $100,000 of taxable income (i.e. ordinary income plus dividends and capital gains) over $200,000.

For example, assume a couple has $200,000 in taxable ordinary income and $100,000 in dividends and capital gains, giving them total taxable income of $300,000.   Their tax hit will be about $6,000 — $5,000 from the increase in dividend and capital gains tax rates (5% X $100,000) and $1,000 from the increase in the effective rate on ordinary income ($300,000 minus $200,000 = $100,000 => 1/2% rate increase times $200,000 = $1,000).  In rough numbers, their income taxes would go from $67,000 to $73,000 — an increase of almost 9% — and their effective tax rate would go from 21% to over 24%.

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Here’s a handy chart for eyeballing 2011 effective ordinary income tax rates at a range of taxable income levels. 

Technical note: Remember to separate out capital gains and dividends from taxable ordinary income — since they get a 5% hit. But, use total taxable income (ordinary income plues dividends and capital gains ) to estimate the increase in the ordinarary income effective tax rate.

In a subsequent post, I’ll incorporate the ObamaCare 3.8% payroll tax on AGI over $200,000 to be added in 2013 and look at the return of the uber-marriage penalty.

* * * * *

Next up: The payroll tax surcharge …  add 3.8% for all income over $200,000

OK, what’s the effect if Obama lets the Bush tax cuts expire? Big hurt or little hurt ?

Here’s a first cut …

* * * * *

Base Case

Assume a married couple earning a combined $250,000 in taxable income.  Their tax liability based the 2009 tax rate schedule would be $60,320 — an effective tax rate of 24%. 

Literally reverting back to the pre-Bush 2000 tax rate schedule, they’d owe $73,048 — a 29% effective tax rate — and a 21% increase over the current tax rates.

That’s a big hurt … and probably an unlikely worst case scenario.

* * * * *

Likely Obama Plan

Remember that Obama has often said “not a dime more in taxes for families making less than $250,000″ … and sometimes said the same for individuals making less than $200,000.

In fact, according to the Tax Foundation, the plan outlined in the Obama administration’s budget is to allow:

• The top tax rate to revert from 35% to 39.6%. 
• The 33% tax rate to revert to 2001 law (rate of 36%) but the income threshold where that bracket starts will shift up to $250,000 in taxable income (couples) and $200,000 for singles
• The rate on long-term capital gains to revert to 2001 law (rate of 20%) but only for couples with over $250,000 in AGI the year the gain is realized ($200K threshold for singles)
• The rate on dividends to be hiked to long-term capital gains rates, i.e. up to 20%, but below ordinary income tax rates.

  Excerpted from Tax Foundation: Fate of Bush Tax Cuts Uncertain As Expiration Approaches, March 25, 2010   http://www.taxfoundation.org/research/show/26062.html

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If the Tax Foundation is right, here’s what the brackets would look like for married couples per the Obama budget:

If Obama keeps his word on this one, our illustrative couple earning $250,000 won’t pay higher income taxes.

What about their friends who earn more and have more wealth to spread around ?

Well, a couple earning $500,000 would have their tax liability go from $137,500 (an effective tax rate of about 27.5%) —  to $150,000 (an effective tax rate of about 30%) — roughly a 9% increase in their taxes paid.

Draw your own conclusion whether that’s a lot or a little …

Note: This is only the increase due to the tax brackets shift if the Bush tax cuts are allowed to expire … it does not consider:

• The impact of the likely increase increase in the capital gains tax rate (from 15% to 20%), or the increase in the dividends tax rate (from 15% to either 20% or the ordinary income tax rate)
•  … or the triumphant return of the marriage penalty (on steroids this time)
•  … or the 3.8% payroll tax surcharge on AGI over $200,000 (including dividends and capital gains)  to be added in 2013 to pay for ObamaCare. 

I’ll cover capital gains and dividends below … and  the marriage penalty and ObamaCare payroll tax surcharge in subsequent posts.

* * * * *

Estimating your tax hit

Here are some back-of-the-envelope ways to ballpark how much more you’ll be paying in income taxes in 2011 …

If your taxable income (AGI minus deductions) is less than $200,000 (individuals) or $250,000 (couples) — and if Obama keeps his campaign pledge — then your income taxes won’t go up.

If taxable income is over the thresholds …

The tax rate on capital gains will go up 5% … and the tax rate on dividends will go up at least 5% (to the capital gains tax rate) and maybe all the way up to ordinary income tax rates.

For ordinary income, the effective (not marginal) tax rate increase on ordinary income will be about 1/2% for each $100,000 of taxable income (i.e. ordinary income plus dividends and capital gains) over $200,000.

For example, assume a couple has $200,000 in taxable ordinary income and $100,000 in dividends and capital gains, giving them total taxable income of $300,000.   Their tax hit will be about $6,000 — $5,000 from the increase in dividend and capital gains tax rates (5% X $100,000) and $1,000 from the increase in the effective rate on ordinary income ($300,000 minus $200,000 = $100,000 => 1/2% rate increase times $200,000 = $1,000).  In rough numbers, their income taxes would go from $67,000 to $73,000 — an increase of almost 9% — and their effective tax rate would go from 21% to over 24%.

* * * * *

Here’s a handy chart for eyeballing 2011 effective ordinary income tax rates at a range of taxable income levels. 

Technical note: Remember to separate out capital gains and dividends from taxable ordinary income — since they get a 5% hit. But, use total taxable income (ordinary income plues dividends and capital gains ) to estimate the increase in the ordinarary income effective tax rate.

In a subsequent post, I’ll incorporate the ObamaCare 3.8% payroll tax on AGI over $200,000 to be added in 2013 and look at the return of the uber-marriage penalty.

* * * * *

Next up: The payroll tax surcharge …  add 3.8% for all income over $200,000

This brief was originally posted July 23, 2008. 

Since expiration of the Bush tax cuts is looming soon, I thought they’re worth another look — just as background 

In subsequent posts, I’ll deal with the likely implications of letting the cuts expire … 

* * * * *

Summary: We’ve all heard the  rants about the cuts in the top bracket rate, capital gains rate, dividend taxes, and estate taxes.

But, when was the last time that your heard a candidate (on either side) or a pundit (O’Reilly included) mention the new 10% bracket, larger and refundable child and earned income credits, negative income taxes, elimination of the marriage tax penalty, or expanded college benefits?

* * * * *

The income tax cuts of 2001 and 2003 are shorthanded by the press and political candidates as “Bush’s tax breaks for the wealthy — who didn’t even want them”, and are blamed for an accelerating polarization of wealth distribution (i.e. rich get richer, poor stay poor).

Warren Buffet says his secretary pays more taxes than he does (really?). McCain says he’ll stay the course. Obama says that he’ll roll back the tax cuts if he’s elected and redistribute them to the “folks who need them the most”.

All of the rhetoric got me thinking.  Somewhat embarrassed, I realized that I didn’t know exactly what was in the Bush tax plan.  (Quick Test: take out a sheet of paper and jot down the tax breaks enacted as part of the Bush plan)

Prompted by curiosity (and a modicum of selfish interest) I did some digging.  Here’s what I found, along with my “take”:

The top marginal income tax rate  was cut from 39.5% to 35% (applied to Taxable Income >$350,000)
– the 36% marginal rate was cut to 33%  (TI > $161,000)
– the 31% marginal rate was cut to 28%  (TI> $77,000)
– the 28% marginal rate was cut to 25%  (TI > $32,000)
…  a clear benefit to the top half of income earners; with the biggest benefit to the highest earners

Capital gains and dividend tax rates were reduced to 15% for high-earners, zero for low earners … more of a benefit to high-earners, but 1/3 of households own stock and more than 1/4 of returns (including many retirees) report dividend income … turned out to be a windfall for hedge funds and private equity via the “carried interest” loophole (more on that in a subsequent post)

A low-income 10% tax rate bracket was introduced … benefit to many low-earners previously in the 15% bracket

Child Care Credit and Earned Income Tax Credit were increased and made refundable … resulting in zero or negative tax due balances for millions of people (note: “refundable” means that any negative tax due is paid to the citizen — a very important policy shift)

Income limits were eliminated on personal exemptions and itemized deductions … the former helps low earners most — since it’s a higher proportion of income; the latter benefits higher earners most — since they are the ones who itemize deductions. (Note: roughly 2/3’s of tax filers take the standard deduction)

Marriage penalty was neutralized … benefits middle-earning couples most

College education benefits were liberalized, e.g. 529 plans, student loan interest deduction, tax-free employer paid tuition … benefits mid- and high-earners most (since their family members disproportionately attend college)

Estate taxes were reduced and to be phased out… only impacts wealthy folks with estates that are big enough to be subject to “death taxes”

* * * * *

Details re: “Bush Tax Plan” – 2001 and 2003

Officially, the first round of Bush tax cuts were codified in the “Economic Growth and Tax Relief Reconciliation Act of 2001” which was approved by the Congressional conference committee on May 25, 2001; signed into law shortly thereafter; but phased in over a several year period.  The key provisions of the law (as reported in the conference committee’s report):
Introduce a 10-percent rate bracket… reducing the rate from 15% to 10% for the first $6,000 of taxable income for single individuals ($7,000 for 2008 and thereafter), $10,000 of taxable income for heads of households, and $12,000 for married couples filing joint returns ($14,000 for 2008 and thereafter).

Reduce individual income tax rates  … from 28 percent, 31percent, 36 percent, and 39.6 percent are phased-down over six years to 25 percent, 28 percent, 33 percent, and 35 percent, effective after June 30, 2001.

click table to make it bigger

Phase-out of Itemized Deductions and Restrictions on Personal Exemptions … by eliminating all limitation on itemized deductions and any restrictions on personal exemptions for all taxpayers by one-third in taxable years beginning in 2006 and 2007, and by two-thirds in taxable years beginning in 2008 and 2009, and by 100% for taxable years beginning after December 31, 2009.

Increase and Expand the Child Tax Credit… Increasing the child tax credit to $1,000, phased-in over ten years. and by making the child credit — subject to certain income limitations — non-taxable and refundable (i.e. payable to the person if the net tax liability is zero),

Provide relief from the “marriage penalty” … by increasing the basic standard deduction for a married couple filing a joint return; by increasing the size of the 15-percent regular income tax rate bracket for a married couple filing a joint return to twice the size of the corresponding rate bracket for an unmarried individual filing a single return.; and by increasing limits on the Earned Income Tax Credit.

Provide Education Benefits… by increasing the annual limit on contributions to education IRAs to $2,000; by expanding the reach of 529 tuition programs; by extending the non-taxibility of employer paid tuition; and by raising income phase out levels for deductability of student loan interest.

Phase-out and Repeal of Estate and Generation-Skipping Transfer Taxes:

* * * * *

In 2003, a second round of tax changes was enacted in the “JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003” which:

Accelerated the phase in of the 10% bracket, the reduction in other bracket rates, the child care tax credit, and marriage penalty relief.

Provide reductions in taxes on capital gains and dividends … reducing the 10- and 20-percent rates on capital gains on assets held more than one year to five ( zero, in 2008 ) and 15 percent, respectively. and providing that dividends received by an individual shareholder from domestic and qualified foreign corporations generally are taxed at the same rates that apply to capital gains.

* * * * *

Source Reports
http://www.jct.gov/x-50-01.pdf
http://www.house.gov/jct//x-54-03.pdf

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Next up: What if Obama let’s the Bush tax cuts expire ?  You may be surprised …