Calculate the Income and Payroll Tax Cut You Would Receive Under Different Tax Proposals

At the end of 2010, Congress enacted a compromise tax plan extending the Bush tax cuts for two years and providing other tax cuts. President Obama originally wanted to make permanent the Bush tax cuts for all but the very rich, while some lawmakers (mostly Republicans) wanted to make them permanent for everyone.

Find out how much you will pay in federal income and payroll taxes in 2011 under the compromise plan, and how much you would have paid under different options that lawmakers were considering:

1) Congress did nothing and the Bush tax cuts were allowed to completely expire.

2) Congress enacted Obama's original proposal to extend the Bush tax cuts fully for 98 percent of taxpayers and some additional tax cuts (the Making Work Pay Credit and expansions of the Child Tax Credit and EITC that were included in the Recovery Act).

3) Congress enacted legislation to extend the parts of the Bush tax cuts exempt from the PAYGO law requiring most tax cuts to be offset with new revenue or savings. The tax cuts exempt from PAYGO are similar to Obama's tax proposal but do not include the Making Work Pay Credit, and include only part of the EITC expansion in the Recovery Act. This option also excludes the partial extension of the tax break for stock dividends for high-income taxpayers.

4) Congress extended all of the Bush tax cuts but none of the tax cuts included in the Recovery Act.

5) The compromise plan, which Congress enacted, to extend the Bush income tax cuts for all income levels and the expansions of refundable credits in the Recovery Act, and reduce the employee share of the Social Security payroll tax from 6.2 percent to 4.2 percent in 2011.

Answer the following questions and and the calculator will do the rest. The information you provide is not recorded in any way and will be seen by no one besides you.

This calculator will not work for taxpayers with Social Security income, taxpayers with zero income or negative income, or taxpayers with unusual situations.

And, obviously, you should not rely on this calculator to calculate your actual taxes. It makes some simplifying assumptions that may not apply to you.

The notes at the very bottom of this screen will answer most of your questions about assumptions used by this calculator and how this calculator differs from others you may have seen.

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Notes

1) We use the term "Obama's Tax Plan" to refer to the President's original plan to make permanent the Bush income tax cuts only for the first $200,000 of income for an unmarried taxpayer and the first $250,000 of income for a married couple, and to extend and some additional tax cuts (the Making Work Pay Credit and expansions of the Child Tax Credit and EITC that were included in the Recovery Act).

2) The income percentile, the share of tax cuts going to your percentile or lower, and the share of tax cuts going to people in higher percentiles, are all calculated using the Institute on Taxation and Economic Policy Tax Model. More information about the ITEP Tax Model can be found here.

3) This online income tax calculator only addresses income tax cuts and payroll tax cuts. The Bush tax cuts also include a gradual repeal of the tax on the estates of millionaires. If the effects of making permanent the estate tax repeal were included, then of course an even larger share of the benefits from extending all the Bush tax cuts would go to the highest income percentiles, because only wealthy families are affected by the estate tax.

4) The Making Work Pay Credit, which is part of President Obama's original tax plan, is technically part of the income tax and is therefore presented here as a cut in the income tax. However, it can be thought of as a payroll tax cut because it effectively eliminates the 6.2 percent employee share of the Social Security payroll tax on the first $6,450 of earnings ($12,900 of earnins for a married couple). In our report on the compromise tax plan, we present the Making Work Pay Credit as a payroll tax in order to compare it to the payroll tax cut included in the compromise.

5) This calculator was updated using the recent inflation adjustments announced by the IRS.

6) The Tax Foundation has an income tax calculator that comes to different conclusions because it makes different assumptions. For example, we assume that "current law" really does mean that Congress does nothing but allow current law to run its course. In this situation, relief from the Alternative Minimum Tax (AMT) would expire. The Tax Foundation assumes that AMT relief would be extended even in its "current law" scenario. Another difference is that the Tax Foundation assumes that if Congress follows President Obama's approach, it will enact a provision limiting the benefit of itemized deductions for wealthy people to 28 cents for each dollar of deductions. We do not include this assumption because both parties in Congress have made it clear they will not enact it. We also make some slightly different assumptions about inflation and rounding and, as a result, our assumed standard deductions and personal exemptions are $50 different from those assumed by the Tax Foundation.