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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