The debilitating effects of a failure to continue the tax cuts may take as long as 2 years to be fully realized. Sometime during that timeline, based on H&S patterns forming in all major market indices, there will be a meltdown the likes of which will make 1929 look like a walk in the park. Hopefully voters, if their vote still counts, will wake up before then and throw every current politician out of office in favor of ones who know what it takes to keep the ship from capsizing, which means restoring political power to where it belongs, with the People. Based on recent past history, unfortunately, that probably is unlikely to happen. Too many seem to have a “death wish”.
The special tax rates on long-term gains and qualified dividends will expire on December 31, 2012. Starting 2013, the tax rate on long-term gains will be 20% (or 10% if a taxpayer is in the fifteen percent tax bracket). Also starting in 2013, the distinction between ordinary and qualified dividends will disappear, and all dividends will be subject to the ordinary tax rates.
Also beginning in 2013, capital gain income will be subject to an additional 3.8% Medicare tax for married joint filers making more than $250,000.