Most Americans have a fairly strong opinion of former President George W. Bush, either for or against his eight-year reign. One thing that all Americans can agree on, however, is that he was a serial tax cutter, with tax reduction as one of the cornerstones of his economic policy. Many of these tax cuts were enacted with sunset provisions, meaning they were embedded with predetermined expiration dates, many of which are coming up in 2011 and 2012. These sunset provisions were placed in the tax laws in some cases to garner enough legislative support to get the bills passed, or to get around rules that existed on cutting revenue without passing an offsetting spending cut. (Learn more in Tax Credits You Shouldn't Miss.)

In Pictures: Top 10 Solutions For A Big Tax Bill

Major Legislation
The two major tax-cutting bills from the Bush era were the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, and the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003.

These two laws cut taxes across the board for earned income, long-term capital gains and dividends. The legislation also expanded the child tax credit and made dozens of other changes and adjustments to the tax code, involving exemptions, deductions and the marriage penalty. (For more, see The JGTRRA: Reducing Dividend Tax Rates.)

Tax Brackets
EGTRRA created six tax rate brackets – 10%, 15%, 25%, 28%, 33% and 35%, based on income levels. If no extension is passed and signed into law, then the pre 2001 tax rates will go back into effect starting in tax year 2011. The 10% bracket would disappear, and those taxpayers would move up to the 15% bracket, which would apply to all incomes below $34,550. The other tax rates would increase to 28%, 31%, 36% and 39.6% for the highest earners making more than $379,650.

Child Tax Credit
One major provision that will expire at the end of 2010 is the child tax credit, which EGTRRA doubled from $500 to $1,000 per child. Unless Congress votes to extend the child tax credit, the maximum amount will revert back to $500 for tax year 2011, and the number of families eligible for that amount will be much less as tougher eligibility standards that existed prior to EGTRRA will go back into effect. (For further reading, see How To Claim A Dependent.)

Capital Gains/Qualified Dividends
The maximum tax rate on long-term capital gains and qualified dividends were also reduced to 15%, with lower income filers facing a 0% tax rate. The sunset provisions would move the capital gains rate back to a maximum of 20%, and qualified dividends would resume being taxed at the regular tax rate of the filer, or as high as 39.6%.

Marriage Penalty
EGTRRA also eliminated the so called "marriage penalty" and gave a married couple filing jointly a standard deduction twice that of a single filer. Tax rates were also adjusted for joint filers to remove the penalty. These provisions are set to expire as well. (For further reading, see Happily Married? File Separately!)

Other Expirations
Another legacy of the two tax cuts was the elimination of the phase out of the personal exemption, which was gradually eliminated over time. If no extension is passed, then the phase out will resume at incomes above $122,500.

The phase out for itemized deductions were also eliminated by the Bush tax cuts, and these will also kick back in. Some taxpayers may lose as much as 80% of their itemized deductions if their income is too high.

Democrats Strike Back
The Democratic Party hated the tax cuts when they were first passed and are moving to rein them in. President Obama's has asked Congress to extend and make permanent the 10%, 15% and 25% tax rates. The 28% bracket would be recalculated to include individuals with income less than $200,000 and married filers with income less than $250,000. The "rich" would be out of luck under the proposal, with the 33% and 35% brackets expiring at the end of 2010, and the former 36% and 39.6% tax rates going back into effect.

Obama is also seeking to make permanent the long-term capital gain rates of 0% and 15%, but tax capital gains at a rate of 20% for those taxpayers that fall into the 36% and 39.6% brackets. None of this has been decided yet, and passage is not certain due to the politics of Washington in general - and during an election year in particular.

Bottom Line
Most politicians are reluctant to raise taxes. In this case, they may not have to because the sunset provisions embedded in tax cutting legislation from the Bush era will result in significant tax increases in the United States over the next few years as long as they do nothing. Whether they will do this with an impending election is another thing.

Catch up on your financial news; read Water Cooler Finance: I-Spy, IPOs And iPhones.

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