Modest adjustments to our federal tax rates can save $2.7 trillion over a decade.
The Congressional Budget Office (CBO) reported last August that, if the Bush tax cuts were not extended, these savings would be realized, according to an article from The Fiscal Times.
A Washington Post article, also written last August, stated: “The CBO's baseline scenario assumes that the Bush-era tax breaks will expire, as current law provides."
In that case, next year's deficit would fall to $1.07 trillion, or 7 percent of the country's total economic output, or gross domestic product, according to agency estimates. By 2012, the deficit would shrink to $665 billion, or 4.2 percent of GDP. For the full text of the Post article, refer to:
I prefer the scenario where we retain the 10 percent bracket created by the Bush tax cuts to continue to provide that benefit to those with the lowest incomes. The 15 percent bracket remained the same under the tax cuts. Thus, the rate for that bracket would not be increased.
Therefore, reverting to the pre-Bush-era taxes would not affect families with taxable incomes under $68,000 (per the 2010 tax brackets). The other brackets would increase as follows: 25 percent moves up to 28 percent; 28 percent to 31 percent; 33 percent to 36 percent and 35 percen to 39.6 percent.
How much pain will these changes cause for Americans? A family with a $100,000 annual income will pay an extra $960 in taxes. Those making $200,000 would pay an extra $3960, an additional 2 percent of taxable income (after all exemptions and deductions have been subtracted from gross income). To make your own calculations, you can do the math, using the tax information from About.com.
Do any of us enjoy the prospect of paying higher taxes? Of course not, but the sacrifices of returning to pre-Bush-era taxes are really not going to turn family budgets upside down.
Will these changes affect the hiring practices of small businesses? Not at all. Any business, large or small, adds employees when demand for its product or services exceeds its ability to satisfy that demand with existing staff. The small increase in taxes that the vast majority of small businesses would pay with these new rates would not affect their ability to hire nor would it influence their hiring decisions.
I realize that Congress has extended the Bush tax cuts until the end of 2012. For 2013 and beyond, they'll have a new decision to make on taxes. I hope they will do the right thing and let the cuts expire.