| The potential fallout of not extending the U.S. tax | | | | cuts was the 15% bracket. The cuts lowered the |
| cut legislation, implemented by President George | | | | minimum to 10% of income. That will increase to |
| Bush's administration, is staggering. The U.S. | | | | 15% when the tax cuts expire. In fact, those |
| economy is in a state of crisis. Many economic | | | | who are currently in the 10% tax bracket will be |
| experts believe this could be the staggering blow | | | | hardest hit when the tax cuts expire because |
| that pushes the unemployment rate even higher | | | | their tax burdens are set to increase by a full five |
| as small business owners are forced to begin | | | | percent or a 50% increase in their tax liability. The |
| laying off even more employees in order to | | | | highest tax bracket will only see an increase of |
| maintain the slimmest of profit margins. | | | | 4.6%. All others will only see a 3% increase. |
| What did the Bush Tax Cuts Accomplish? | | | | Here are Just a few of the potential problems |
| There are many questions about the tax cuts and | | | | that will arise as a result of allowing these tax |
| a lot of debate about how effective they were. | | | | cuts to expire on December 31, 2010. |
| It's a good idea to get familiar with them and | | | | Small businesses will lay off workers. Small |
| make up your own mind for how they could | | | | business owners stand to take a huge hit with |
| potentially impact your business, your | | | | additional taxes on top of the health care bill that |
| employment, or even your ability to employ | | | | was recently signed into law. Both of these will |
| others as the case may be. | | | | take a huge financial toll on businesses at a time |
| The cuts were an across the board cut that | | | | when revenue and sales are at all time lows for |
| impacted the capital gains tax, federal income tax, | | | | many businesses. Ultimately, they will be unable to |
| and the estate tax. The common misconception is | | | | maintain their current labor force and even more |
| that it was a tax cut only for the wealthy. This is | | | | layoffs will take place in the first part of 2011. |
| simply not true. In addition to the tax cuts | | | | Other businesses will place a freeze on all new |
| mentioned above, the tax cuts extend to the | | | | hiring. At a time when new jobs are most vital |
| working poor, parents, and married couples while | | | | for the recovery of our economy, businesses will |
| increasing tax credits for savings related to | | | | stop hiring. |
| education and retirement. | | | | No new jobs will be created. People will stop |
| Important things to Note About the Tax Cuts | | | | spending money. The bottom line is that even |
| An important consideration that people need to | | | | those paying into the bottom rung of the tax |
| realize about the tax cuts is that they were | | | | ladder (not just the top tier spenders) will have |
| created at a time when the outlook was rosy for | | | | less disposable income. This means fewer people |
| the U.S. economy. President George Bush actually | | | | are spending money which will lead to even more |
| made tax cuts twice during his term in office. The | | | | job instability. |
| first legislation was prior to the horrific acts of | | | | Consumer confidence will be shaken. In a |
| Sept. 11, 2001, and the other was in 2006. | | | | worst case scenario, we could go back to the old |
| In 2001, the idea was to simplify retirement and | | | | days when people buried money in coffee cans in |
| lower the federal income tax rates. These | | | | the back yard or hid it beneath mattresses. It is |
| changes were sweeping in nature and impacted a | | | | inevitable that consumers will simply curtail |
| sizeable cross section of the general public | | | | spending their dollars and of course, not invest it |
| including retirees or those who were preparing | | | | either. They will simply be holding onto it and |
| 401(k) plans and IRAs for eventual retirement. | | | | often not even putting it in banks. There will be |
| The capital gains tax was also reduced to 8% | | | | fewer dollars circulating, buying goods, building |
| from 10% on property or stock that was held | | | | houses, and thus, impacting adversely the overall |
| for 5 years or more. | | | | standard of living which in turn will perpetuate |
| By 2006, the top tax rates had been reduced | | | | bigger problems for the U.S. And world economies. |
| from 39.6% to 35%. The overall tax burden on | | | | This is probably the most dangerous of all |
| married couples who filed jointly were also | | | | possibilities. |
| reduced by an increase in standard deductions. It | | | | Is there a Silver Lining to be Found? |
| also increased the tax credit amount per child in a | | | | There is however one potentially positive side |
| household as well as the amount of credit for the | | | | effect to come out of the elimination of the tax |
| care of dependent children. | | | | cuts President George Bush created. More people |
| These tax cuts are set to expire at the end of | | | | will be forced to explore other options than |
| 2010 without intervention by congress. The | | | | working for someone else. We will see a huge rise |
| prevailing rule of thought is that unless significant | | | | in the number of people going into business for |
| changes are made during the | | | | themselves. |
| November elections, there is little likelihood of that | | | | As the competition rises for fewer jobs to be |
| happening. | | | | found, people will be forced to find alternatives to |
| What Will the Elimination of these Tax Cuts Mean | | | | traditional employment. Many people are finding |
| for Tax Payers? | | | | that now is the perfect time to strike out on their |
| There are those who would love to spin these | | | | own and embrace the entrepreneurial spirit that |
| cuts as cuts that only impact the wealthiest | | | | has brought the U.S. to so much economic |
| among us. That simply isn't the case. Everyone | | | | prosperity in the past. The technology of today |
| who pays taxes will be impacted in one way or | | | | makes starting a new business easier than ever |
| another by the elimination of these tax cuts. | | | | before. |
| The lowest tax bracket prior to the Bush tax | | | | |