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Tax cuts due to expire, estate tax return

December 31, 2010 - UNITED STATES

The tax cuts introduced by former president George W. Bush in 2001 and 2003 are due to expire on Dec 31. And on 1 Jan, the estate tax that lapsed in 2009 -- a 55 per cent rate for estates larger than US $1 million -- will be reinstated automatically. Both issues produced a monumental battles in Congress. A potential compromise deal between the Democrat-led White House and now Republican led Congress could avert the expiration of both.

The tax cuts introduced by former president George W. Bush in 2001 and 2003 are due to expire on Dec 31. And on 1 Jan, the estate tax that lapsed in 2009 -- a 55 per cent rate for estates larger than US $1 million -- will be reinstated automatically. Both issues produced a monumental battles in Congress. A potential compromise deal between the Democrat-led White House and now Republican led Congress could avert the expiration of both. Present Barak Obama had pledged to continue the lower tax rates for individuals earning less than US $200,000 and families earning less than US $250,000, earnings brackets he regards as middle class. Republicans portray eliminating the cuts as a new curb on economic recovery and as a proxy for arguments about the size of government. The compromise retains the tax cuts for all, in return for a handful of concessions regarding the estate tax and elsewhere. If no tax legislation is passed, rates will revert overnight on 31 Dec. The top income tax rate will return to 39.6 per cent from 35 per cent now, with corresponding increases in rates for lower income brackets. The White House's budget forecasts relied heavily on rolling the top income tax rates back to their pre-2001 levels. (Last updated Dec 2010)

Battle Looms in Washington Over Expiring Bush Tax Cuts (NYT 24 Jul 2010)

2-Key U.S. Democrat backs keeping tax cuts for rich (Reuters 21 Jul 2010)

Geithner Favors Allowing Some Tax Cuts to Expire (ABC 25 Jul 2010)

Date written/update: 2010-12-31