Fiscal conservatives and taxpayers are certainly happy with the extension of the rates, which were to be the largest in modern history. They certainly would have added a significant strain to the fledgling economic recovery.
Fiscal liberals are happy with the extension of unemployment benefits from the current two years to three years and the retention of several tax rebates for the poor.
Both conservatives and liberals are wondering how we are going to pay for the whole package. Conservatives are wanting to fund the package with deep spending cuts to entitlement programs. Liberals are wanting deep spending cuts to anything but health, education, public employee wages, and welfare…which frankly doesn’t leave much to cut. Keynesians are suggesting we continue to borrow for all the excess spending and inflate our way out of the debt issue.
Whatever the eventual solution, the fact that the tax rates were extended to 2013 sets up a very interesting political season for 2012. It is also in 2013 that the Healthcare tax increases hit, setting up 2013 to see the most tax increases in modern history.
The next two years will give the nation an opportunity to have a substantive debate on our economic direction. Let’s hope we use the opportunity wisely.
At least for now, KFG clients who are shareholders of c-corporations who are sitting on pins and needles wondering if they needed to declare dividends in 2010 can rest easy. The 15% tax on dividends will be around for another two years. There is also no need to pile income into 2010. We can see what December of 2012 will bring.