Joint Committee on Taxation: Here's how President Obama's Tax Cut Plan Would Work

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Description of the President’s Fiscal Year 2011 Budget Proposal

The proposal permanently extends the 10-percent, 15-percent, 25-percent and 28-percent individual income tax rates.10 For taxable years beginning after December 31, 2010, the 33-percent rate and the 35-percent rate brackets become 36-percent and 39.6 percent, respectively.

The proposal widens the tax rate bracket for the 28-percent rate so that individuals with less than $195,550 of taxable income in 2011 ($200,000 of adjusted gross income (“AGI”), assuming one personal exemption and the basic standard deduction, indexed from 2009) will not be subject to the new 36-percent rate.

For married individuals filing joint returns and surviving spouses, the dollar threshold for the new 36-percent bracket is set so that married couples and surviving spouses with adjusted gross income below $237,300 of taxable income in 2011 ($250,000 of AGI, assuming two personal exemptions and the basic standard deduction, indexed from 2009), currently subject to the 33-percent rate, will not become subject to the new 36-percent rate.

For head of household filers, the starting point of the 36-percent bracket is set at the midpoint of the starting points for single filers and married joint filers, rounded down to the nearest $50, or $216,400.

The table on page 9 from the (46 page) download below illustrates tax rates for 2011 under President Obama's proposals. Page 7 comparison the tax rates in effect for 2011 without President Obama's plan. As you can see, joint filers are allowed to have $23,050 in extra income before they must pay the marginal rate of 36% on taxable income above $237,300. Remember AGI and taxable income are not the same. Taxable income is after all exemptions and deductions.

http://www.jct.gov/publications.html?func=startdown&id=3691