Fast money

8 September 2010 By James Pethokoukis

Wall Street isn’t waiting for Washington to figure out the fate of tax cuts due to expire at yearend. Some firms may consider moving forward annual bonuses to December to lock in lower rates for their stars. The impact would be tantamount to a pay hike at little cost to banks.

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U.S. lawmakers are weighing the continuation of a series of tax cuts enacted in 2001 and 2003 under former president George W. Bush that expire at the end of this year. President Barack Obama and his Democratic allies in Congress want to extend the lower rates for individuals earning less than $200,000 or couples making less than $250,000.

Without action, tax rates will rise for all income groups, to 15 percent, 28 percent, 31 percent, 36 percent and 39.6 percent, from the current categories of 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent respectively.

Also under current law, the tax rate on upper income groups for dividends will be treated as ordinary income in 2011, jumping to about 40 percent. Obama has proposed raising tax rates on capital gains and dividends for the upperincome brackets to 20 percent from the current 15 percent.

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