Stimulate, Destimulate, Stimulate, Destimulate, Stimulate…

By February 22, 2009Taxation

From the Washington Post, “Obama’s First Budget Seeks To Trim Deficit“:

Obama also seeks to increase tax collections, mainly by making good on his promise to eliminate some of the temporary tax cuts enacted in 2001 and 2003. While the budget would keep the breaks that benefit middle-income families, it would eliminate them for wealthy taxpayers, defined as families earning more than $250,000 a year. Those tax breaks would be permitted to expire on schedule in 2011. That means the top tax rate would rise from 35 percent to 39.6 percent, the tax on capital gains would jump to 20 percent from 15 percent for wealthy filers and the tax on estates worth more than $3.5 million would be maintained at the current rate of 45 percent.

Current rate of 45 percent? Yes, but it’s also important to point out that under tax legislation enacted in 2001, the death tax is phased out and ultimately repealed in 2010. That is, a rate of 0 percent. Absent new legislation, the tax will revert to rates as high as the confiscatory level of 55 percent in 2011.

Also, instead of encouraging investment through capital gains reduction, it appears President Obama’s plan would raise the tax, discouraging investment.


Leave a Reply