The Associated Press reported earlier this week the results of its September AP-GfK poll. On the question, "The tax cuts that were passed in 2001 will expire this year if they are not continued. Which of the following best describes what you think Congress should do about the tax cuts?"
- 15 percent of respondents said that the tax cuts should expire for everyone
- 39 percent said that the tax cuts should expire for people earning more than $250,000 but should be continued for other people
- 44 percent said the tax cuts should be continued for everyone
- 2 percent responded "Don't know"
Interestingly, that split -- between people who would let tax cuts for the rich expire and those who would continue them for everyone -- extends to economists, too. There are those who think that raising taxes now would stall our nascent economic recovery; then there are those who think that the U.S. desperately needs the added revenue.
I was discussing the issue the other night with our son, who's a sophomore at ASU. I mentioned something about the days when the top tax rate was 70% and his jaw dropped. So for those who are too young, or have simply chosen to forget, I decided to do a little recap on America's tax history (since 1975 anyway). It's illuminating:
Graph: Income Tax Rates for Persons Married Filing Jointly, 1975-2010
Current US$
Source: Tax Foundation
For more see the detailed chart below.
The issue at hand today is whether to allow the "Bush-era" tax cuts, passed in 2001 and 2003 expire, as they're scheduled to on January 1, 2011. As the law currently stands, if Congress does nothing then the tax code will revert (for the most part) to its 2001 vintage come next New Year. That would mean:
- The two "marriage penalty elimination" provisions will expire, so that:
- The standard deduction for married couples will fall, no longer double what it is for single filers; and
- The ceiling of the 15% bracket for married couples will fall, no longer double what it is for single filers
- The 10% tax bracket will expire, reverting to 15%
- The child tax credit will fall from $1,000 to $500
- The tax rate on long-term capital gains earned by middle- and upper-income people would rise from 15% to 20%
- The tax rate on qualified dividends earned by middle- and upper-income people would rise from 15% to ordinary wage tax rates
- The 25% tax rate would rise to 28%
- The 28% rate would rise to 31%
- The 33% rate would rise to 36%
- The 35% rate would rise to 39.6%
- The personal exemption phase-out provisions would be restored, rescinding from high-income people the value of some exemptions and deductions
- The estate tax would be restored with an exemption level of $1 million and rates that top out at 55%
(Source: Tax Foundation)
President Obama has been advocating extending the tax cuts for everyone but the wealthiest Americans (those who make $250,000 or more a year). Yet there's not overwhelming support for, as the AP put it, the "Robin Hood" idea of raising taxes on the rich. What do you think? Share your thoughts below (no registration required).
Chart: Income Tax Rates for Persons Married Filing Jointly, 1975-2010
Current US$
Source: Tax Foundation
