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Report Compares Typical Family Tax Bills for 2011 Under Three Scenarios: Tax Cuts Expire vs. Congressional Democrats’ Plan vs. Congressional Republicans’ Plan

Washington, DC, October 13, 2010 - The Tax Foundation has calculated what 11 typical tax returns will look like in 2011 under three scenarios:
  • If Congress does not intervene to prevent the expiration of all the Bush and Obama tax laws that are set to expire this December 31;
  • If the Congressional Republican plan is enacted, which with some modifications extends the Bush tax cuts but not the Obama tax credits; and
  • If the Congressional Democratic plan is enacted, which with some modifications extends the Bush tax cuts and some Obama tax credits for those who earn less than $200,000 ($250,000 for couples).
"A total expiration of tax cuts enacted during the Bush and Obama years was considered highly unlikely a few months ago," said Tax Foundation Staff Economist Mark Robyn, who authored the new report, "but as year's end approaches, an unprecedented tax expiration that would raise taxes on almost every filer can't be ruled out."   The report only looks at tax bills in 2011, excluding tax increases enacted as part of health care reform which don't go into effect until later in the decade. Tax Foundation Fiscal Fact, No. 251, "Family Tax Returns in Doubt As Expiration Approaches for Bush and Obama Tax Cuts: Three Likely Policy Scenarios," is part of a series answering frequently asked questions about tax expiration.

Online, see the study, http://taxfoundation.org/publications/show/26779.html, and the FAQ, http://www.taxfoundation.org/publications/show/26135.html.  

Four of the 11 typical families were families of four:
  • A married couple (one earner) making $50,000 a year with two children would owe the federal government $690 in 2011 under either the Democratic plan or the Republican plan, but $2,833 under total expiration.
  • A married couple with two children, but with both spouses working and together earning $85,000, would owe the federal government $5,385 in 2011 under either the Democratic plan or the Republican plan, but $7,235 under total expiration.
  • A married couple with two children, both spouses working and together earning $150,000 ($135,000 in wages and $15,000 in long-term capital gains) would owe the federal government $17,800 in 2011 under either the Democratic plan or the Republican plan, but $21,602 under total expiration.
  • A married couple with two children, with both spouses working and together earning $300,000 and claiming a $20,000 deduction for mortgage interest would owe the federal government $64,971 in 2011 under the Republican plan, $68,392 under the Democratic plan, and $76,616 under total expiration.
The Fiscal Fact also presents the effective tax rates (taxes as a percentage of income) for all 11 families and includes breakdowns of the typical deductions, exemptions and credits.  

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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