Tax devil is hiding in the details

"And I can make a firm pledge: under my plan, no family making less than $250,000 will see their taxes increase – not your income taxes, not your payroll taxes, not your capital gains taxes, not any of your taxes."

President Obama spoke those words during a speech in Dover, NH on Sept. 12, 2008.

The Jobs and Growth Tax Relief Reconciliation Act of 2003, widely referred to as the Bush tax cuts, will expire on December 31, 2010.

President Obama has said recently he will keep his pledge that "no family making less than $250,000 will see their taxes increase."

But is there a devil hiding in the details that will make the president's pledge not completely true?

One provision of the JGTRRA is that individuals in the 15 percent tax bracket, those earning less than $34,000 and couples earning less than $61,300, would pay no taxes on capital gains held for longer than one year.

There are restrictions regarding this provision.

If the capital gains are high enough to push the taxpayer into the 25 percent income bracket, they would pay capital gains taxes on some of that gain. So there are limits on the gains that can be tax free.

But any capital gains that keep the taxpayer under the income limits are currently not taxed.

So back to the president's pledge.

If he allows this provision of the so called Bush tax cuts to expire, an individual earning say $16,000 or couple earning $38,000 who in buy a stock today and sell it in 2011 for a profit of $5000. would have to pay a capital gains tax on the profit earned on their 2011 taxes. A tax they would not have had to pay on their 2010 taxes.

A tax increase on people earning "less than $250.000." Right?

If the president is planning to extend this provision of the Bush tax cuts I comend him for his honesty and statesmanship.

However, if the president plans to let this provision expire along with the lower tax rate on individuals earning $200,000. or more, he will break his pledge.A pledge made to some of the lowest paid individuals and couples in the country who need every dollar than can earn, whether it be from their hard labor or smart investing.

Because remember in the president's own pledge he also includes, "not your capital gains taxes."