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How Lower Rates from Tax Reform Could Raise Your Tax Bill

If the Bush tax cuts expire as scheduled at year-end, the top federal income tax rate will automatically jump from 35% to 39.6% (or 43.4% if you count the 3.8% surtax on investment income of high earners).

But here's a man-bites-dog alert: It's likely that tax rates will go down -- that's right, down, not up -- when Congress tackles fundamental tax reform (perhaps as early as 2013).

The Simpson-Bowles tax reform proposal, for example, says the top rate could drop to 23% if lawmakers eliminate all "tax expenditures" (tax-geek talk for deductions, credits, and various and sundry other tax breaks). But lower rates can come at a cost beyond the loss of a cherished tax break. Read on to find out how:

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