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2002–2003

27%

30%

35%

38.6%

2004–2005

26%

29%

34%

37.6%

2006 and after

25%

28%

33%

35%

These new tax rates were instituted during the year 2001, and were accompanied by tax refund checks for the majority of tax payers in anticipation for the year 2001’s taxes (those due by April 15, 2002). While the law has been changed to reflect these new tax rates and their steady, albeit gradual, decline over the next few years, it’s important to note that this new law has what is known as a sunset provision. That is, unless Congress passes new tax laws prior to 2011, both these tax brackets and the law that enacted them are due to expire in 2010. Higher-income taxpayers will also see that they will no longer lose their personal exemptions or have their itemized deductions reduced beginning in 2006. That law will also be repealed in 2010 barring any further action from Congress. The above table doesn’t take into account the existing 15-percent tax bracket, or the newly instated 10-percent tax bracket.

Old law

28% 31% 36% 39.6%

2001

27.5% 30.5% 35.5% 39.1%

CHAPTER 10

196

Table 10.1

New Federal Tax Rates

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