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>> John Connaughton, Ph.D.
The political issue that’s of a real concern to us going forward is the Bush Era tax cuts
and whether or not some action takes place during the second half of this year to deal
with those tax cuts. Now, you have to remember, those tax cuts will expire on December 31st
if nothing is done, so there is kind of a sunset law on this. The problem with that
is, while everybody is focusing on the top one percent and the taxes they pay, what is
not really being made very clear to the American public is the impact the Bush Tax Cuts have
on lower income people and lower-middle and middle income people. I’ll give you a couple
of examples: one is, that right now for lower-middle income people, the first marginal rate that
you run into is a ten percent rate and that’s going to increase to fifteen percent if the
Bush tax cuts go away. And so that’s going to be a chunk of change, five percent additional
in taxes for lower income people. The next group of people to be affected are the middle
income people. Taxable income is about 68,000-69,000 and their current tax rate now is twenty-five
percent and that will rise to twenty-seven percent unless those tax cuts are continued.
To put that in perspective, at the same time that those tax cuts would expire, if nothing
is done, in addition there will be the expiration of the social security two percent tax holiday
that we’ve had last year and in 2012, so altogether average middle income people could
be facing four percent increase in their tax rate. So it could go from, essentially, a
twenty-five percent marginal rate plus the 5.65 percent of the current social security
and Medicare tax, combine that’s right over 30 percent, that could go up by four percent
to about 34 percent if nothing is done on the tax front. So that’s something that
to me is a concern if politicians can get together. That’s the biggest political issue
going forward.