President Obama, in a statesman-like series of decisions, has worked out a compromise with the new Republican majority in the House of Representatives regarding jobless benefits, income taxes and estate taxes. Although some of the President’s democratic colleagues did not see eye-to-eye with the President on this issue, in the spirit of compromise, they have also agreed to the new tax law.
Middle Class Tax Relief Act of 2010: The George Bush Era Tax Rates for all Taxpayers
President Obama had initially said he would let this tax law expire because he felt it was too generous to individuals he felt were “wealthy”. President Obama described wealthy individuals as individuals who earned over $250,000.00 per year. Please be advised, President Obama, that individuals who earn $250,000.00 per year in the State of New York are NOT WEALTHY. Yes, they are earning a significant income; but considering the tax rates and the cost of living in New York, they are basically living at a high middle-class level.
The new tax bill has a cost of $858 billion over the years 2011 and 2012. This new law extends various business tax breaks that were initially designed to encourage further investments into business infrastructure that expired in the year 2009.
New Social Security Rate
The Social Security rate for the year 2011 will be cut by a third, from 6.2% to 4.2%. This will save a working individual, who earns $50,000.00 per year, approximately $1,000.00. The social security tax rate will go back up again in 2012 to 6.2%.
Estate Taxes: New Estate Tax Rates
The estate tax rate for 2011 and 2012 will be 35% for assets over $5 million. Individuals will also be entitled to have a stepped-up date of death cost basis in any property that is inherited for 2011 and 2012.
President Obama Moves to the Center
President Obama is moving towards the political center. This agreement will give President Obama a forceful campaign issue when he runs for re-election. He will be able to campaign on the basis that he did not raise taxes! He will further be able to argue that he sustained the economy by keeping the tax reductions set up by his predecessor, George Bush, in effect. This will take the punch out of the Republican presidential candidates’ election platforms. They usually accuse Democrats of being addicted to tax and spend policies.
It should be noted that President Obama had to change his position with regard to extending the Bush era tax cuts. On several previous occasions, President Obama had made it clear that he would not extend the Bush era tax cuts for all Americans. He was only prepared to extend them for individuals who earned less than $250,000.00 per year. President Obama’s compromising on this issue was the right thing to do.
The Law Offices of Schlissel DeCorpo, for more than three decades, has been assisting their clients with estate administration, estate planning and the drafting of wills and trusts. Our law office has extensive experience in dealing with estate situations when individuals die without a will (intestate). In estates where there are estate taxation issues, we can assist the administrator, executors and trustees in all aspects of estate and tax planning. Feel free to call our law office at 1-800-344-6431, 516-561-6645 or 718-350-2802 for assistance with all issues involving wills, trusts, estates and elder care concerns.