Tax Day of Reckoning: January 1, 2011

Interesting article in the Washington Post:  Tax Deal Sets Day of Reckoning; Tough Choice on Deficit in Store for President, Congress in 2011, by Jonathan Weisman:

With this week's hard-fought agreement on a $70 billion tax-cut extension, President Bush and congressional Republicans have effectively set a date for a fiscal day of reckoning for the next president and a future Congress: Jan. 1, 2011.

House and Senate negotiators reached agreement this week on legislation to extend the deep tax cuts on capital gains and dividends beyond their scheduled 2008 expiration date, through 2010. Final passage of the agreement must wait until Republican tax writers agree on a second tax bill that includes many of the tax breaks jettisoned from the measure on capital gains and dividends. If the deal wins congressional approval, every major tax cut passed in Bush's first term will be set to expire on the same day five years from now.

The Tax Policy Blog lists the major federal tax changes that will take place in 2011 if the tax package is enacted:

• Individual income tax rates rise from the current 10%, 15%, 25%, 28%, 33%, and 35% to 15%, 28%, 31%, 36%, and 39.6%
• Child tax credit falls from the current $1,000 per child to $500 per child.
• Capital gains tax rates increase from the current 5% and 15% to 10% and 20%
• Dividends rise from the current 5% and 15% to ordinary income rates (15% - 39.6%)
• After being fully phased out in 2010, the estate tax would be fully reinstated in 2011 with a top rate of 60% and a $1 million exemption