Tax Deal (Current Event) Essay Example | Topics and Well Written Essays - 1250 words

Tax Deal (Current Event) - Essay Example e final, concluding section of the paper will offer an overview of the situation and consider the merits of the various positions and the probable outcome. In simplest terms the current debate revolves around the Presidents campaign promise to not extend significant changes to personal income tax rules that were introduced under President George W. Bush. Under President Bush two significant bills reducing personal income taxes were introduced: The Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. The chart on the following page outlines the impact of these two tax bills on personal tax levels. In simplest terms the bills lowered the personal income tax rate on the lowest level of income (below USD 7,150) and on the highest levels (USD 29,050). Those earning between USD 7,150 and 29,050 remained constant. However, as is often the case with government legislation the devil is in the details. The bills also changed the dollar figures around the highest tax brackets pushing them upwards slightly. For example, in 2000 one entered the highest tax bracket if they earned USD 288, 351 but by 2003 that number had increased to USD 311,951. Therefore a person who earned USD 300,000 in both those years was paying 39.6% in 2000 but only 33% in 2003. (â€Å"Federal Tax Brackets†) Also, under President Bush significant changes in other aspects of personal income, notably on capital gains. Capital gains tax is levied on the market value received on sale of an asset beyond its book value or purchase price. If an asset is bought for $50 and sold for $75, the realized capital gain (profit) is $25. Capital gains generally increase as ones personal wealth increases as it implies having personal wealth to invest. A person working in a minimal wage job rarely has large sums to invest. The exact opposite is true of a person who has a substantial income. Therefore, as a general rule, decreases in the capital gains