|
|
|
Tax
Brackets:
Tax Rates as of 2000:
0 - 26,250 15%
26,250 - 63,550
28%
63,550 - 132,600 31%
132,600 - 288,350 36%
288,350 - above 39.6%
|
|
Tax Rates as of 2010:
0 - 8,375 10%
8,375 - 34,000
15%
34,000 - 82,400
25%
82,400 - 171,850 28%
171,850 - 373,650 33%
373,650 - above 35%
|
|
EGTRRA
created six tax rate brackets--10%, 15%, 25%, 28%, 33% and 35%,
based on income levels. If no extension is passed and signed into
law, then the pre-2001 tax rates will go back into effect starting
in tax year 2011. The 10% bracket would disappear, and those
taxpayers would move up to the 15% bracket, which would apply to all
incomes below $34,550. The other tax rates would increase to 28%,
31%, 36% and 39.6% for the highest earners making more than
$379,650. |
|
Child Tax
Credit:
The
child tax credit was doubled from $500 to $1,000 per child. |
|
Capital
Gains/Qualified Dividends:
The maximum tax rate on long-term capital gains and
qualified dividends were also reduced from 20% to 15%, with
lower income filers facing a 0% tax rate. |
|
Marriage
Penalty:
EGTRRA also eliminated the so-called "marriage
penalty" and gave a married couple filing jointly a standard
deduction twice that of a single filer. Tax rates were also adjusted
for joint filers to remove the penalty. |
|
Death Tax:
The Death Tax was
eliminated.
The
prior death tax rate was 55% on estates over $1 million.
|
|
Analysis:
These tax
cuts, whether it be a lower tax bracket, higher Child Tax Credit,
Lower Capital Gains tax rates, elimination of the Marriage Penalty,
or elimination of the Death Tax all meant that Small Business owner
get to keep more money that they can use to invest in their
businesses in order to grow the business and hire more workers.
This is a key source of revenue at a time when small businesses find
it difficult to obtain financing from lending institutions. Most
small businesses are financed by the personal finances of
individuals. Not Angel Investors, Venture Capitalists, Banks or
Credit Unions. If these tax cuts are reversed, even for those
making over $250,000 it will have a negative impact on most small
businesses. Businesses that generate over $250,000 in revenues do
business with other businesses that make less than $250,000. If the
have to pay higher taxes they will have less disposable income to do
business with smaller businesses and expand their own business.
Sources:
Economic
Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, and
The Jobs and Growth Tax Relief
Reconciliation Act of 2003.
by Owen Daniels
|
|
|
