Obama's budget in a nutshell

President Obama's proposed 2011 budget calls on Congress to make a number of tax changes for individuals.  These include:  Letting tax cuts expire - the 2001 and 2003 Bush tax cuts are scheduled to expire by 2011 - the 33% bracket would become 36% and the 35% bracket would rise to 39.6%.  The long-term capital gains tax rate would increase to 20%, up from 15%;  limit itemized deductions - to cap at 28% the rate at which high-income households can itemize their deductions.  Currently the value of a deduction is equal to the deductible amount multiplied by one's top income tax rate, which can range well above 28%; keep the estate tax - assumes the estate tax will be made permanent at a $3.5 million exemption level per person and a top rate of 45% on taxable estates.

That's more generous than current law, which calls for a $1 million exemption level and a 55% top rate starting in 2011; raise taxes on investment fund manager profits - tax the portion of profits paid to managers of hedge funds and private equity funds as ordinary income rather than as a capital gain, subjecting it to much higher tax rates than the 15% capital gains rate currently imposed; eliminate capital gains tax on small business stock - eliminate the capital gains tax altogether on stock in small businesses held for at least five years; make tax cuts permanent on lower and middle income - tax cuts will be made permanent for everyone making less than $200,000 ($250,000 for couples); permanently protect the middle class from the "wealth" tax; extend the Make Work Pay credit - one-year extension of the stimulus-created tax credit; permanently expand a low-income tax credit - families making less than $85,000 would be able to claim nearly double the child and dependent care tax credit for which they currently qualify; permanently extend the American Opportunity Tax Credit - expanding the existing Hope Scholarship tax credit and making it partially refundable.  So much for deficit restraint.

About the author:
Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

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