What Will The Tax Rates Be In 2011

By NJECPAC Government Affairs
Director Joseph Hovanec Jr.

No one knows what the tax rates will be in 2011. The current tax rates (commonly but incorrectly referred to as the Bush Tax Cuts) are set to expire at the end of this year. The current tax rates have been in effect nearly a decade. They ceased to be tax cuts and became the current tax rates the moment they were signed into law.

The expiration of those tax rates will lead to increased taxes on income, capital gains, dividends, and estates. That would be an epic failure, since raising taxes in a weak recovery is the last thing lawmakers should even consider.

But Congress in the lame duck session is still led by Nancy Pelosi, who in lockstep with Harry Reid hasn’t taken any action to stop the coming tax hike, preferring instead to devote the lame duck session to less pressing issues like the DREAM Act immigration amnesty and Don’t Ask, Don’t Tell.

Harry Reid is pushing for forcing a vote on extending the current rates only for those making under $200,000. He already knows that extending the tax rates only for those making under $200,000 is doomed to fail so why force a vote on it. The reason is politics at its worst. When the vote fails they will use that to demonize Republicans, falsly claiming that they dont care about the middle class. 

A weak but likely at least minimally effective political tactic.  

One arguement I have heard against extending the tax rates for everyone is how much it will cost. How is it possible that extending current tax rates can "cost" anything when it represents revenue that the Government hasnt had for so long? Keep in mind it is not their money to begin with.

Contimplating 2011

Another arguement I heard recently is the current tax rates have been in effect for so long and they havent reduced the unemployment rate. That is the weakest arguement of them all. The unemployment rate under George Bush was as low as 4.3% and more revenue was flowing into the federal government than ever in the history of the country. It was not the tax rates that caused the weak economy leading to the current unemployment rates. The primary reason that those rates are not helping now is the real possiblity that they will go up January 1st. Businesses have retracted any expantion plans which includes any new hiring because of the prospect of facing huge tax increases.

Pause and reflect for a moment on the absurdity that businesses, entrepreneurs, financial planners, tax preparers, and taxpayers have no certain idea of what they’ll be expected to pay the IRS come January.