Tax Increases Next Year: One example

My accountant, TJ Williams in Mill Valley, sends out a very informative newsletter that included the following about the Bush tax cuts that have not been extended by the Obama administration.   It’s hard to understand how all this will affect us until it’s spelled out.   Here’s TJ on one example showing a 2011 tax bill unless Congress and the President act:

Working couple:  John and Marsha both work, and have two children in grade school.  Their income is from wages, and they also use the standard deduction.  Their income is $70,000 in wages.

In 2010, starting tax is $5,439, less the $2,000 child credit, and less an $800 for tax credit for workers.

TOTAL for 2010 is $2,639

In 2011, unless the direction is changed, the starting tax on this couple is higher by more than a thousand dollars:  $6,555.   The child tax credit is cut in half, only $1,000.   And there is no tax credit for workers.

TOTAL tax bill for 2011 will be $5,555.

Back to me:  Businesses and families are planning for these increases and uncertainty by pulling back now.  In my opinion, hiring, salaries, or home values will not be increasing any time soon.  (but here in Marin, they may not decrease, either!)