As usual, Congress has passed a new spending bill with a long, complex name. Despite the tax savings (tax rate preservation) that comes with this bill, it also includes additional deficit spending, which has become the normal way of doing things in Washington the past several years. Political opinions aside, I will summarize a few of the highlights of this bill:
1) Extension of all current tax rates through 2012
2) Temporary modification of Estate, Gift and Generation-Skipping Transfer Tax for 2010-2012
3) AMT Patch for 2010 and 2011
4) Extension of "tax extenders" for 2010 and 2011
5) Temporary Employee Payroll Tax Cut
The average American might wonder what all of this means. With the exception of the new estate tax rates, Congress and the President have left our tax system very similar to how it is now for an additional two years. Most tax filers will see a tax return similar to 2009 for 2010 and 2011. One temporary tax reduction is the payroll tax "holiday" that reduces payroll taxes by 2%, saving most working Americans between $800 and $2,000 during 2011.
Although keeping tax rates low and temporarily reducing the payroll tax will provide a short-term boost to the economy, I feel that a better, longer-term, strategic approach to providing government services and funding our government is needed. We should let Americans work hard and innovate as they have in the past and the jobs and prosperity will follow. In the meantime, each of us should take a hard look at our personal financial situations and make any necessary adjustments in order to put our individual financial houses in order.
