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HSFPP Update # 242—Bush Tax Cuts: Should They Stay or Should They Go?
Message from Flashman: This week’s update builds on Update # 241, as well as last week’s video lesson, in getting teenagers to think about the democratic process and the issues that will affect their lives. Congress and President Obama must soon deal with former President Bush’s tax bill, which will expire on January 1, 2011. What they do or don’t do with about extension of this bill will have a significant impact on the federal deficit and on the economy.
It is likely that President Obama and the Democratic Congress will make every effort during the lame duck session to pass a tax stimulus bill that will not increase the deficit. Having suffered losses in the midterm elections, the Democrats will need to look fiscally conservative; but, considering that a continuing high unemployment rate contributed to Democrats’ losses, they also need to show that they feel the people’s pain by reducing the unemployment rate.
New HSFPP Facebook Page
The Kentucky High School Financial Planning Program is now on Facebook! We have added a Facebook page to our Web site so we can better serve you with current research related to personal finance, news stories, and favorite links. We also see it as a way of getting more feedback and suggestions for future updates and video lessons.
Our new Facebook page is open for discussion. Please feel free to post on our wall or comment on our discussion board!
Academic Expectation 2.18
Students understand economic principles and are able to make economic decisions that have consequences in daily living.
Academic Expectation 1.2
Students make sense of the variety of materials they read.
Academic Expectation 1.4
Students make sense of the various messages to which they listen.
Web Site Picks of the Week:
“The Tax Calculator”
The tax calculator allows you to see what percent of your income is taxed depending on your tax bracket. It also gives you an unofficial estimate of what you will owe in taxes.
In the New$... Bush Tax Cuts: Should They Stay or Should They Go?
By Nicole Stork-Hestad, a Ph.D. Student in Family Studies at the University of Kentucky
Now that the midterm elections are over, Congress will probably take up the question of whether Former President Bush’s tax cuts should be extended to all income brackets starting January 1, 2011.
President Obama has proposed a tax bill that he hopes will be voted into effect before January 1, 2011. This act proposes the continuation of some of the tax cuts, primarily those that apply to singles who make less than $200,000 yearly and married (filing jointly) who make less than $250,000 yearly. The law would also allow other tax cuts to expire, primarily those for singles who earn $200,000 or more yearly, and married (filing jointly) who make $250,000 or more yearly.
The original purpose of the Bush tax cuts (the JGTRRA, 2003) was to promote economic growth. Republicans say all of those tax cuts should continue during the current harsh economic climate, in order to stimulate the economy.
The chart below shows tax rates based on income before 2003; between 2003-2010, when they were reduced under the Bush tax cuts; as well as tax rates proposed by President Obama for 2011, and possibly beyond.
The Tea Party, along with many other Republicans just elected, won on the promise to reduce the federal budget, but at the same time to renew the Bush tax cuts for all income levels in order to stimulate growth and jobs. The only way possible to do this is to reduce federal spending by reducing the funding of all programs or to cut programs completely such as the Department of Education.
What Positions Can You Take on Tax Cuts?
Letting Some Tax Cuts Expire. President Obama has proposed letting the tax cuts expire that apply only to high-income taxpayers—couples earning incomes above $250,000 and singles earning incomes over $200,000.
Letting All Tax Cuts Expire. Some members of Congress would let all of the tax cuts outlined in the policies above expire as scheduled. This would actually raise the tax in every income bracket.
Making All Tax Cuts Permanent. Some members of Congress, primarily Republicans, want to make all of the tax cuts outlined in the policies above permanent.
Temporary Extension of All Tax Cuts. Some members of Congress would extend all the tax cuts outlined in the policies above, but only temporarily until the economy fully recovers from recession.
The following chart shows how the tax rates on income would fluctuate according to which position prevails when legislation is finally voted on.
Up to $8,575
Then to $34,850
Then to $84,350
Then to $171,850
Then to $195,550
Then to $382, 650
Above that level
Urban Institute & Brookings Institution. (n.d.). Expiration of the Bush Tax Cuts. Tax Policy Center. Retrieved October 22, 2010, from http://www.taxpolicycenter.org/taxtopics/Expiration_Bush_Tax_Cuts.cfm.
Chart Source: Moneychimp. (n.d.). Federal Tax Brackets. Retrieved October 24, 2010, from http://moneychimp.com/features/tax_brackets.htm.
The following Web sites will help you find information on the pros and cons of continuing the Bush tax cuts. Looking up key words like cigarette taxes on Internet search engines will also yield many sources of information.
Divide into two groups: those in favor of continuing or increasing the Bush tax cuts for all income levels, and those only for those making less than $200,000. If you have another position on tax cuts, please choose the group nearer to your own position. Each group develop a position paper to state your group’s case. Then debate your positions, giving each side adequate time to rebut the other side’s arguments with facts. Be sure to keep your debate civil, even if politicians often don’t.
Kentucky High School Financial Planning Program
The purpose of the HSFPP financial updates, video lessons, and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP, updates, and video lessons meet Kentucky core concepts. The Web site, updates, and video lessons are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.
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