Washington, DC, May 26, 2010 – The Tax Foundation has calculated what 10 typical tax returns will look like in 2011 under three scenarios: if all the Bush and Obama tax cuts expire completely at the end of this year, if all the Bush tax cuts are extended to 2011 or made permanent and if President Obama’s budget is adopted, which includes a combination of expirations and extensions.
“President Obama has proposed extending most of the Bush tax cuts benefiting families making less than $250,000 a year in addition to some new tax policies targeted at low- and middle-income households, such as the Making Work Pay Credit,” said Tax Foundation Staff Economist Mark Robyn, who authored the report. “It’s important to note that the report only looks at tax liabilities in 2011, and doesn’t include tax increases enacted as part of health care reform, which don’t go into effect until later in the decade.”
“It remains to be seen how rising federal deficits will affect taxpayers after 2011,” Robyn added.
Tax Foundation Fiscal Fact, No. 227, “Taxpayers Face Uncertainty in 2011 As Bush and Obama Tax Cuts Expire,” is available online at https://www.taxfoundation.org/publications/show/26320.html. The Fiscal Fact is part of a series answering frequently asked questions about the expiration of the Bush tax cuts, available online at https://www.taxfoundation.org/publications/show/26135.html.
The 13-part series outlines how the three tax scenarios would affect key tax parameters such as tax rates and brackets, the standard deduction, the estate tax and other provisions. It also addresses questions such as “How much did the Bush tax cuts cost the Treasury in foregone revenue?” and “Who received the biggest tax savings from the tax cuts?” among others.
If all the Bush tax cuts are allowed to expire at the end of 2010, a single parent who earns $25,000 a year with one child would receive $928 from the federal government in 2011 in refundable tax credits. If all the Bush tax cuts are extended, the parent would receive $1,881 in refundable credits. Finally, under Obama’s policies, the parent would receive $2,281 in refundable credits.
A married couple (two earners) making $85,000 a year with two children would have a tax liability of $7,235 in 2011 if all the Bush tax cuts expire, $5,383 if all the cuts are extended and $4,583 if Obama’s policies are adopted.
A single taxpayer earning $60,000 with no children would see a tax bill of $8,236 in 2011 without any of the Bush tax cuts, $7,484 with all of the Bush tax cuts and $7,084 with the combination of expirations and extensions proposed by President Obama.
A double-earner married couple making $150,000 with two children would have a tax liability of $22,776 in 2011 if all the Bush tax cuts expire, $19,268 if all the cuts are extended and $18,468 under Obama’s proposed combination.
A double-earner married couple making $1 million with no children would see a tax bill of $298,510 in 2011 if all the Bush tax cuts expire, $254,167 if all the cuts are extended and $307,342 if Obama’s policies are adopted.
For additional examples of how the tax bills of typical families would look under the three tax scenarios, see the full report, Tax Foundation Fiscal Fact, No. 227, “Taxpayers Face Uncertainty in 2011 As Bush and Obama Tax Cuts Expire,” available online at https://www.taxfoundation.org/publications/show/26320.html. The Fiscal Fact also presents the effective tax rates (taxes as a percentage of income) for the families and includes detailed breakdowns of the typical deductions, exemptions and credits for each of the tax returns.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
Report issued by Natasha Altamirano of the Tax Foundation