What the 2011 Federal Marginal Tax Rates Could Look Like – Pure Speculation

July 13, 2009

I’ve been doing a little reading lately about the taxes. As we all know, the Bush tax cuts expire after 2010. There is talk about leaving the tax cuts alone for the lower brackets but bringing back the 36% and 39.6% tax brackets for taxable incomes of $250,000 and above. Based on that information, I took the 2009 federal income tax brackets for married filing jointly (MFJ), which look like this:

Source: Wall Street Journal

I took those numbers, added the new tax brackets, added a 3% inflation adjustment (for two years) to the brackets, and this is what I came up with:

2010 Federal Income Tax Brackets (PURE SPECULATION)

In addition to the new tax brackets, there’s also talk of…

• a surtax of 1% for families who make over $250,000, 2% for families who make over $500,000, and 3% for incomes over $1,000,000. These rates could double in 2013.

• limiting itemized deductions to 28% for incomes over $250,000.

• the possibility of the 1.45% medicare tax being added to dividends.

Did I miss anything? If so, leave a comment and I’ll add it to the list of possible changes.

Although these numbers are pure speculation, I did base them on things I have read (mostly the Wall Street Journal).

5 responses to What the 2011 Federal Marginal Tax Rates Could Look Like – Pure Speculation

  1. I believe the cuts expire after 2010 (meaning 2011). I suspect the surtax if ennacted (which is against modified AGI – not taxable income) kicks in for 2010 (haven’t checked the effective date). So you probably need to index it another year out to 2011 for your chart to be close to accurate. Of course with the surtax going against AGI it will not be reduced by itemized deduction (or standard) or exemptions – which are both subject to phaseouts which result in further bumps to the rate. All this w/o any consideration of AMT.

    The 2011 rates are important if you are planning a Roth conversion when the income cap comes off in 2010. You have the option of deferring the income to 2011/12 (essentially an interest free loan), but the income will hit against the new tax rates.

  2. I think the 33% rate will remain for taxable incomes from $208,850 (before adjustment) to $250,000 — otherwise, those folks would get a tax cut according to your chart. The Dems don’t want that.

  3. Nice work. I heard at some point that they were considering having SocSec kick in again over the 250K level – meaning you pay as normal up to ~$107K, and then pay another 6.2% for everything over $250K. If you’re self employed, this REALLY does a number on you since you pay both sides….

    Also, there is talk about completely phasing out certain deductions for incomes over 250K or possibly 350K, independent of the 28% limitation you mentioned.

    Paying higher incremental rates is one thing, but limiting deductions that everyone else is allowed is totally another. I’m so tired of the “fair share” argument.

    According to the IRS, in 2007, earners over $500K AGI contributed 37% of total tax revenue, the number grows to 55% when lowering the bar to include those over $200K – you can then estimate those over the magical 250K marker contributed roughly 40% of total revenue. This number will easily hit 50% after the changes, which means each person in the top 5% will be carrying the load of 9 other tax payers. Buyers remorse anyone?


  4. Larry, your logic is correct, The Top 5% income earners or Top 1/20th will only have to pay statistically as much as 9 other income earners, not 20. Doesn’t seem so bad now does it? Especially when many of those earners have little to no discretionary/disposable income, as such their ability to proportionally pay more is quite diminished.

    We need to limit deductions for everybody, and everybody is going to have to pay the credit card bill for the Bush years, and unless Obama can curb the spending – we’ll have to pay it off too.

    As a high earner, I can purchase Gov Bonds with my extra income, getting a tax free payout from everybody else.

  5. Justin,

    I hate to break this to you but the tax bill under Bush is NOTHING compared to the tax bill this country faces under Obama.

    Yes, Bush made mistakes. But, Obama is screwing this country and is going to leave it in much worse shape than Bush did.