The federal economic-stimulus packaged includes tax provisions focused on cutting marginal tax rates and expanding tax incentives.Â While the new tax agenda increases taxes on upper-income Americans, it also includes plenty of tax cuts.
To fund deficit-reduction and other federal projects, the new stimulus law would increase a range of taxes – which falls in line with President Obama’s pledge to cut taxes for the middle class while allowing tax cuts for the rich to expire.
Tax burdens will shift to the wealthy with the expiration of the tax cuts put in place during the Bush administration. Couples earning more than $250,000 would see the top tax rate rise to 39.6% by 2011. There also would be new limits on tax deductions, including for charitable donations.
The plan would also make permanent the payroll tax credits of up to $400 for individuals and $800 for couples that were part of the recently passed economic stimulus package.
Other tax provisions include:
- New tax credit that provides expanded $2,500 tax credit for college expenses.
- Capital gains taxes on small businesses would be eliminated, saving them $7 billion over 10 years.
- Increased credit up to $1,500 a year for energy efficient home improvements.
- Credit for first-time home buyers increased to $8,000.
- Increase in Earned Income Tax Credit to 45% for family’s first $12,570 of earned income, or $5,656 for families with three or more children.
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