How will Bush’s budget proposal affect your taxes? February 7, 2006
Despite heated protest from the US Congress, it’s good to see Bush creating incentives for people to save money in his budget plan for 2007. In his plan, he asks Congress to kill the estate tax and create new tax-favored savings vehicles to encourage people to increase their savings. He wants to cut the rates on long-term capital gains and dividends (15%), which are now set to expire at the end of 2008, and on personal income taxes, now set to expire after 2010 (The top federal tax rate on ordinary income is 35%.). This would protect more taxpayers from the AMT, a parallel tax system originally designed to prevent upper-income taxpayers from avoiding taxes altogether through the use of deductions and credits. But because it hasn’t been adjusted for inflation, the tax is reaching further into the middle class each year. The number of taxpayers getting hit by the AMT is expected to jump to 22.2 million people in 2006 if Congress doesn’t take action.
It will be interesting to see what gets approval in the coming weeks. Let’s hope it favors tax payers and not increasing government spending.
Source:
Bush’s Budget Seeks to Preserve Tax Cuts
By MARY DALRYMPLE, AP Tax Writer