While the following infographic on the subject of the Bush tax cuts made me somewhat dizzy and made my eyes spin, I thought it was interesting, nonetheless. I picked it up from CreditLoan.com and thought it brought out some talking points and big questions: how do these tax cuts affect our personal financial situation, and what kind of impact will it have on government spending?
This is a rather pretty picture, but you may want to expand it to make better sense of it. You can say that these tax cuts are matters of contention and debate. Nobody is entirely satisfied if you look at our tax issues piecemeal. The information and data depicted here represent the government tax relief efforts which occurred in 2001 and 2003, and which then expired by the end of 2010. President Obama then signed some extensions for these cuts very recently.
Bush Tax Cuts Extension: How Will This Affect Us?
Some interesting notes from the infographic:
#1 How much tax will a married couple with 2 children pay if the Bush tax cuts DON’T expire?
#2 How much tax will a married couple with 2 children pay if the tax cuts DO expire?
Effects of the Bush Tax Cuts on Households
The general claim is that tax cuts are good because they offer households more disposable income in order to spend more and to invest more. But they are detrimental to the economy in the long term because the deficit won’t be paid down. Then there’s that whole matter of whether tax benefits should not apply to the wealthy or whether everyone should benefit.
President Obama recently passed an extension for these cuts that will be in effect for another couple of years. But as I’ve been reading, it appears that the true effects of a cut aren’t as pronounced for the “rich” (who are recognized as joint taxpayers who have a $250,000 annual income or single taxpayers with a $200,000 annual income) as they could be, because of the parallel tax known as the AMT. If you fall in the income range of $75,000 to $600,000 then you may not really have seen much of an effect on your tax situation because of the Alternative Minimum Tax. The Tax Policy Center reports that 75% of taxpayers who make between $250,000 and $500,000 per year will be left with only a third of the tax cuts, once all is said and done. In the past, “those people really got clobbered,” says Roberton Williams, a TPC senior fellow. “On average, they lost 63% of their Bush tax cut.” More of this here.
So basically, these cuts aren’t going to save you all that much. The amounts bandied around that a typical family could save, thanks to the extension, amount to something like $4,000 or $5,000 a year. So if you’re already “wealthy”, it may not change your life or make much of a difference to you, but we sure go through a lot of hoops, and a lot of hand-wringing and head-bashing to figure this all out and arrive at this point, thanks to our messy tax system.
Effects of the Bush Tax Cuts on the Government
Now as far as the effects of this legislation on government, pundits go back and forth on this as well. On one hand, less taxes will mean less money to reduce our burgeoning deficit. On the other hand, if these tax cuts expire, there’s the claim that government will simply have more resources to draw from and may use the funds for inefficient or wasteful programs.
So where do you stand on this?
Copyright © 2011 The Digerati Life. All Rights Reserved.