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What are the Bush Era Tax Cuts?

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Today I will focus on the Economic Growth and Tax Relief Reconciliation Act (EGTRRA).

The U.S. has a progressive income tax system. That means that lower-income taxpayers pay a lower percentage of their income than do higher-income taxpayers. Early in his term, President Bush and the Congress voted to reduce the tax percentage rates from those of a previous administration. Taxpayers from top to bottom have paid a lower income tax rate for about 10 years. That the Bush administration changed the income tax rates was not unusual; income tax rates have moved up and down numerous times for various reasons under both Democrat and Republican Presidents (BobGriggs.com).

EGTRRA created six tax rate brackets–10%, 15%, 25%, 28%, 33% and 35%, based on income levels. If no extension is passed and signed into law, then the pre-2001 tax rates will go back into effect starting in tax year 2011. The 10% bracket would disappear, and those taxpayers would move up to the 15% bracket, which would apply to all incomes below $34,550. The other tax rates would increase to 28%, 31%, 36% and 39.6% for the highest earners making more than $379,650 (Forbes.com).

To secure the votes required to pass the tax rate reduction, the Bush administration agreed to a time limit; the rates would remain at the lower level for a specific time period, subject to renewal. The law establishing the lower rates is set to expire at the end of this year. Unless an agreement is reached, the tax rates will return to the levels at which they were prior to the reduction.

Today I will focus on the Economic Growth and Tax Relief Reconciliation Act (EGTRRA).

The U.S. has a progressive income tax system. That means that lower-income taxpayers pay a lower percentage of their income than do higher-income taxpayers. Early in his term, President Bush and the Congress voted to reduce the tax percentage rates from those of a previous administration. Taxpayers from top to bottom have paid a lower income tax rate for about 10 years. That the Bush administration changed the income tax rates was not unusual; income tax rates have moved up and down numerous times for various reasons under both Democrat and Republican Presidents (BobGriggs.com).

EGTRRA created six tax rate brackets–10%, 15%, 25%, 28%, 33% and 35%, based on income levels. If no extension is passed and signed into law, then the pre-2001 tax rates will go back into effect starting in tax year 2011. The 10% bracket would disappear, and those taxpayers would move up to the 15% bracket, which would apply to all incomes below $34,550. The other tax rates would increase to 28%, 31%, 36% and 39.6% for the highest earners making more than $379,650 (Forbes.com).

To secure the votes required to pass the tax rate reduction, the Bush administration agreed to a time limit; the rates would remain at the lower level for a specific time period, subject to renewal. The law establishing the lower rates is set to expire at the end of this year. Unless an agreement is reached, the tax rates will return to the levels at which they were prior to the reduction.