P.I.C. - Economics - Taxes

		TAXES Back to Economics Index Page

Individual Income Tax Rates and Tax Brackets Taxable Income and Rates For 2005 Source: Internal Revenue Service, www.irs.gov
Tax Rate	Single	Married Filing Separately	Married Filing Jointly	Head of Household or Qualifying Widow(er)	Estates and Trusts
10%	$1 to $7,3OO	$1 to $7,300	$1 to $14,600	$l to $10,450	$0 to $2,000
15%	$7,301 to $29,700	$7,301 to $29,700	$14,601 to $59,400	$10,451 to $39,800	$2,001 to $4,700
25%	$29,701 to $71,950	$29,701 to $59,975	$59,401 to $119,950	$39,801 to $102,800	$4,701 to $7,150
28%	$71,951 to $150,150	$59.97810 $91,400	$119,951 10 $182,800	$102.801 to $166,450	$7,151 to $9,750
33%	$150,151 to $326,450	$91,401 to $183,225	$182,801 to $326,450	$186.451 to $326,450	More than $9,750
35%	More than $326,450	More than $183,225	More than $326,450	More than $326,450
"Kiddie Tax." If a child under age 14 has net Investment Income exceeding $1,800 for 2005, the excess is taxed at the parents' top marginal tax rate.

2005 Federal Corporate Tax Rates Source: Internal Revenue Service, www.irs.gov
Tax Rate	Taxable Income Amount
15%	Not more than $50,000
25%	$50,001 to $75,000
34%	$75,001 10 $100,000
39%	$100,001 to $335,000
34%	$335,001 to $10,000,000
35%	$10,000,001 to $15,000,000
38%	$15,000,001 10 $18,333,333
35%	More than $18,333,333
Personal service corporations (used by incorporated professionals such as attorneys and doctors) pay a flat rate of 35%.

Estate and Gift Taxes
Source: Internal Revenue Service, Services and Information

Exclusion: The Tax Relief Reconciliation Act of 2001 increased the estate tax exclusion from $675,000 to $1 mil in 2002 and 2003, $1.5 mil in 2004 and 2005, $2 mil in 2006 through 2008, and $3.5 mil in 2009.
Estate Tax Rates: For 2001 the maximum tax rate on the value of an estate was 55%, reduced to 50% in 2002. Starting in 2005, the tax rate was further reduced to 47% and will continue to decrease until 2007 when the maximum will be 45%, and will remain at 45% until 2009. All estate taxes are repealed for the year 2010. Unless new legislation is passed prior to 2011, the estate laws revert to 2001 provisions,
Resident Alien: The estate of a resident alien is subject to the same rules as that of an American citizen. All property owned worldwide is subject to the U.S. estate tax rules and regulations.
Gifting: Citizens, resident and non-resident aliens can make tax-free gifts of up to $11,000 each year to as many individuals as he or she chooses; twice that amount with consent of the spouse even if only one spouse does the gifting.
Lifetime Gifting: A $1 mil gift tax exclusion is the limit an individual is allowed to give to other individuals (not charities) during his or her lifetime before having to pay gift taxes. The annual $11,000 gifts are not included in the gift tax exclusion.

U.S. Capital Gains Tax, 1960-2005 Source: George W. Smith IV, CPA, Partner, George W. Smith & Company, P.C. The following shows changes in the maximum tax rate on net long-term capital gains for individuals since 1960.
Year	Max %
1960 1970 1971 1972 1978 1981 1987 1988 1990 1997 1999 2001 2003	25.0 29.5 32.5 35.0¹ 28.0 20.0 28.0 33.0² 28.0³ 20.0⁴ 20.0⁵ 20/18⁸ 20/15⁷
(1) From 1972 to 1976, the interplay of minimum tax and maximum tax resulted in a marginal rate of 49.125%. (2) Statutory maximum of 28%, but "phase-out" notch increased marginal rate to 33%; interplay of all "phase-outs" could produce an effective marginal rate to 49,5%. (3) The Budget Act of 1990 increased the statutory rate to 31% and capped the marginal rate at 28%; effective marginal rates could exceed 34% because of the phase-out of personal exemptions and itemized deductions. (4) New rate was for those who, after July 28,1997, sell capital assets held for more than 18 mos (12 mos for sales after Dec. 31,1997). A 10% capital gains rate applied to individuals in the 15% Income tax bracket. (Those who, after July 28. 1997, but before Jan. 1, 1998, sold capital assets held between 12 and 18 mos to be taxed at the old top rate of 28%. Those who sold capital assets after May 6,1997, but before July 29, 1997, to be taxed at the 20% rate, so long as such assets were held for at least a year.) (5) The IRS Restructuring and Reform Act of 1998 repealed the more-than-18-month holding period for sales after Dec. 31, 1997. Beginning Jan. 1, 1998, capital assets needed only be held 12 months to have the 20%110% capital gains rates apply. (6) For capital assets bought after Dec- 31, 2000, and held for more than 5 years, the 20% minimum capital gains rate was lowered to 18%. The 10% rate was lowered to 8%, regardless of when the assets were bought. This provision was repealed in 2003. (7) The maximum capital gains rate for capital assets held more than one year and sold on or after May 6, 2003. was decreased to 15%. The 10% bracket was reduced to 5%. The capital gains rate for the sale of collectibles such as antiques remained at 28%, and the sale of certain depreciable real estate was to be taxed at a maximum of 25%..

The Wealthiest Americans Source: Forbes Magazine On Sept. 22, 2005, Forbes magazine released its 24th annual roster of the 400 wealthiest Americans. Here are the top ten (with Forbes's estimate of their net worth):
Bill Gates Warren Buffett Paul Allen Michael Dell Larry Ellison Christy Walton Jim C. Walton Robson Walton Alice Walton Helen Walton	$51 bil. (Microsoft) $40 bil. (Berkshire Hathaway) $23 bil. (Microsoft) $18 bil. (Dell) $17 bil. (Oracle) $15.7 bil. (Wal-Mart heir) $15.7 bil. (Wal-Mart heir) $15.6 bil. (Wal-Mart heir) $15.5 bil. (Wal.Mart heir) $15.4 bil. (Wal-Mart heir)
The total estimated net worth of all 400 came to 51.13 tril., $125 bil. more than 2004.

Highest income tax rates and the years in effect Source: Internal Revenue Service, www.irs.gov
1945 1952 1962 1965 1982 1988 1993 2005	Roosevelt Administration Eisenhower Administration Kennedy Administration Johnson Administration Reagan Administration G.H.W. Bush Administration Clinton Administration G.W. Bush Administration	94.0% 92.0% 91.0% 70.0% 50.0% 28.0% 39.6% 35.0%