Saturday, May 13, 2006

 

New Tax Bill Passed.

As you may have heard, Congress passed a tax bill this week. Since it doesn’t soak the high-income earners among us, the following spin is of no surprise: New Tax Bill Helps the High End.

Here’s the Post’s summary of the new tax bill:

“The winners include people with large stock portfolios, affluent Americans with big individual retirement accounts, upper-middle income residents of high-tax states and musicians. The bill is less kind to Americans living abroad or the parents of 14-to-18 year-olds who want to invest money on their behalf.”

The article doesn’t do too bad a job quickly summarizing the various changes the bill encompasses although the most widely-reported provision - the 15% Rate for Long-Term Capital Gains & Dividends – is just an extension of the current code.

Another current provision of the tax code requires a child under the age of 14 to pay taxes on his or her unearned income (i.e. interest or dividends) over $1,700 at the parents’ highest marginal rate. As alluded to above, the just-passed tax bill raises the age requirement to 18.

“Not everyone wins. Parents have long been prevented from avoiding taxes on investment income by investing it in the names of their children under 14. Now they will be prevented from doing so for those under 18.”

That’s correct as far as it goes but does anybody believe that if the new bill had, instead, lowered the age to, say, 10; does anyone doubt that the Post would have been quick to point out that the only people who can afford to re-direct investment dollars to their children are of the “High End”?

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