Monday, December 13, 2010

Details of the New Tax Proposal

My associate, Curtis Smith, CFP, recently summed up Obama's proposed tax plan. Below is a summary of the items being discussed:
  • The 10%, 15%, 25%, 28%, 33%, and 35% marginal tax rate structure would be preserved through 2012.
  • A one-year, 2% cut in payroll taxes would make up for the expiration of the "Making Work Pay" tax credit. This 2% cut in payroll taxes would apply to employees only -- employers still need to pay the full cost. It is estimated that this will ultimately cost $120 billion in revenue.
  • The estate tax would be set at 35% with a $5 million exemption per individual. Consequently, married couples who use their exemptions properly would not need to pay estate taxes if their estate is less than $10 million.
  • Long-term jobless benefits would be extended through the end of 2011. This is estimated to cost $56 billion. NOTE: this is an extension of the program as a whole, not an extension of an individual's benefits. An unemployed individual will still only be able to collect benefits as long as before, but the program paying the benefits will be around for another 13 months.
  • Businesses would be able to expense 100% of their investments in 2011 (retroactive to September 2010).
  • The present R&D tax credit and other business-incentive credits would be extended through 2012.

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