Tax Changes in the 2011 Budget Proposal
By: downeycocpa | Posted: 18th February 2010
If you check out the White House's budget webpage, you may be a bit confused. In large letters it states "A
new era of responsibility - the 2011 budget." However, the subsequent budget calls for $1.6 trillion in
deficit spending next year. It certainly confused me and seemed paradoxical.
The details of the budget are a bit ominous. It projects unemployment to remain at 10 percent this year,
decrease to 9.2 percent in 2011 and further decrease to 8.2 percent in 2012. Furthermore, significant
budget deficits are outlined for the foreseeable future.
The budget includes both tax cuts to certain groups and tax increases to other groups. However, to deal
with the bulging deficits, the tax increases greatly outweigh the tax cuts. The tax increases on upper
income families alone is approximately $1 trillion over a ten year period. Here are some of the detailed tax
proposals in the budget:
Bush-era tax cuts
- Most of the tax cuts implemented under the Bush administration are set to expire at
the end of this year. President Obama's proposal is to extend the tax cuts to those earning under
$250,000 ($200,000 if single). For those earning over these amounts, he proposes to let the tax cuts
expire. The most significant impact of these expiring tax cuts would be an increase in the 33 and 35
percent individual tax brackets. These would increase to 36 percent and 39.6 percent, respectively.
Limiting tax deductions
- Another tax increase that will impact higher income families is the limiting
of the benefit of itemized deductions, such as mortgage interest, state taxes and charitable contributions.
This would reduce the efficacy of an itemized deduction by about 25 percent.
Increase the capital gains rate
- For those earning over $250,000, Obama proposes an increase in
the capital gains rate from 15 to 20 percent.
Bank tax
- A tax on banks of $90 billion over the next ten years is proposed. This tax is to pay for the
losses that are emerging from last year's TARP payments.
Oil, gas, and coal tax
- These companies will be exempted from a manufacturing tax break available to
other comparable companies. This will raise taxes on this group nearly $40 billion over the next decade.
Investment managers
- The budget proposes to change the way private equity and other money
managers are taxed. Those folks will see an increase of $24 billion in taxes over the next decade.
Employee growth
- Employers will be eligible for a $5,000 tax credit for each additional employee they
hire during the year.
Make work pay
- Obama proposes to extend this tax break of up to $800 per year for families.
Purchase of capital assets
- Obama has proposed to extend through 2010 a benefit to small and mid-
size businesses that purchase equipment.
Downey & Company is an independent regional Certified Public Accounting firm serving small and midsize businesses for 25 years. We are providing diffrent services related to Audit & Assurance , Corporate Tax Services and also Business Advisory Services . for more details please visit us at http://www.downeycocpa.com
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Tags: significant impact, foreseeable future, new era, mortgage interest, tax deductions, state taxes, efficacy, tarp, bush administration, charitable contributions