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How do the results of the mid-term election bode for the wealthy? Well, at first blush, it could mean that the Bush tax cuts enacted in 2001 and 2003 won't expire for those in the top tax brackets.
The Republicans, who gained control of the House of Representatives, are in favor of extending the tax cuts for every taxpayer. The Democrats, who still control the White House and the Senate, want to extend the income tax and capital gains tax cuts only for taxpayers making less than $250,000, and let the wealthy pay more taxes. Currently the top income tax rate is 35 percent, and the long-term capital gains tax (for investments held more than a year) is 15 percent. If the Bush tax cuts expire, the long-term rate will be 20 percent for those in the 20 percent or higher income tax bracket. The income tax rate for those making more than $250,000 would be 39.6 percent.
There has been debate about the definition of the description "wealthy," with some arguing that in many parts of the country, $250,000 in income will not make you rich. In the tax act of 2003, for instance, the top rate of 35 percent was applied to those making more than $311,950 (if filing single or married filing jointly.)
In this lame duck session before the new Congress convenes in January, any tax legislation is likely to be short-term, with tax cuts extended temporarily. In the longer term, the question is how the stock market will react. If Congress gets tangled in a partisan stalemate and stalls economic growth as a result, the market likely will go down.
Readers, what do you think? Should the tax cuts expire for all taxpayers, or should the wealthy pay more?
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Sorry, but we need that $700 billion to pay down the deficit. I thought Republicans and Tea Partiers cared about the deficit?
Let's not forget it's only a few percent on the earnings above $250,000. So, if you earn $250,001 the increase is like 3 cents. If you earn up to $500,000 it's maybe $600. I think they can manage that.
If you think they need that money to stimulate the economy you might wonder how we got into this ditch considering they've had these tax cuts for a while now. If we want to spend $700 billion lets put it directly into small business that are willing to spend and hire.
I've scrimped and saved. I've foregone X-Box, Wii, etc., while my neighbors buy every new gaming system or gadget as soon as it arrives. I have one TV and it is 13 years old. I have bought a single MP3 player, the screen is cracked but it still works. I've purchased inexpensive vehicles while my peers have purchased BMWs. I buy my clothes at 2nd hand stores. I have no motorcycle, no boat, no seadoo, nor any other such play toy.
Instead of putting money into things, I have been investing money to build a nest egg. I am not rich - I don't make anywhere near 250K - but because of the sacrifices I have made, my investments have started to add up.
Why should I be taxed a second time on money that I've put away, money that was already taxed, money I've saved/invested instead of blown on stuff? Why should I be punished for seeming to have more wealth than the other guy when the reason I have more wealth is due to choices I've made and things I've foregone?
I believe the capital gains tax should increase, while the highest income tax rate should remain at 35%. If it does increase, I do believe the threshhold should rise closer to $350,000. After all, making more money means paying more taxes anyway.
However, 20% sure seems fair to me on capital gains.
I'd love to hear other opinions.