Extend the Bush tax cuts for lower incomes

Below $250,000 will keep current tax rates

Updated: Thursday, March 5th, 2009 | By Angie Drobnic Holan

President Obama has said he would roll back the Bush tax cuts on higher incomes, meaning $200,000 in income for singles and $250,000 for couples. But he intends to leave in place the Bush tax cuts for people who make less than that.

When the tax cuts were first enacted in 2001 and again in 2003, the legislation came with "sunsets," or scheduled expiration dates. Without further action, tax rates will go up for everyone in 2011; at the time it was considered a way to rein in future deficit projections. So new legislation is required to keep in place current tax rates for the lower incomes.

Making the tax cuts permanent are part of the budget outline Obama presented on Feb. 26, 2009.

Obama's budget outline doesn't precisely break out how much it will cost to keep the current income tax rates for lower incomes. But an analysis by the nonpartisan Tax Policy Center found it would cost about $850 billion over 10 years.

His budget does say how much he expects to gain from raising the rates on the higher incomes. Over 10 years, it's $338 billion in additional income taxes, and another $298 billion from reducing exemptions and deductions and increasing capital gains and dividends taxes.

Congress still needs approve Obama's budget, and there will likely be arguments over many things in it. But little opposition is expected to making the tax rates permanent for the lower incomes. So for now, we're rating this promise In the Works.

Sources:

Office of Budget and Management, Budget Documents for Fiscal Year 2010 , Feb. 26, 2009