AsI do each morning when I rise (except during the tax season), I have been checkingTwitter for tax-related “tweets” that lead me to online sources of news andcommentary. This morning I wasespecially interested in finding details on the literally 11th-hourSenate “fiscal cliff” agreement.
CNNMONEY tells us “Senate Bill Stops Many Tax Hikes, but Leaves Big Issues Pending”. The bill would (highlights are mine) -
“Make most Bush tax cuts permanent: The Bush-era income tax rates would be permanently extended for all income upto $400,000 ($450,000 if married). Bush tax cuts that apply to income abovethose levels would expire.
Effectively that means forhouseholds above those thresholds, their top rate would rise to 39.6%, up from35% in 2012.
Plus, the capital gains and dividendtax rates for these high-income households would increase to 20% from 15%. Foreveryone else, investment tax rates would remain at 15% or below {I assume permanently, and I assumethe 0% rate remains – rdf}.
The compromise bill would alsopreserve the expanded parameters for the American Opportunity Tax Credit, theChild Tax Credit and Earned Income Tax Credit for 5 more years.
Permanently protect the middle classfrom the AMT: The bill would permanentlyadjust the income exemption levels for the Alternative Minimum Tax forinflation.
Cap itemized deductions onhigh-income households: The Biden-McConnell compromise would cap how much thosemaking $250,000 (married couples making $300,000) may take in itemizeddeductions.
Retain several expired tax breaksfor individuals: The compromise bill would extend for one or two years a few"temporary" tax breaks for individuals that regularly are extended.These include an option to deduct state and local sales taxes in place of stateand local income taxes; and a deduction for elementary and secondary schoolteachers for certain expenses.
Permanentlyextend a more lenient estate tax: The legislation would preserve the currentestate tax exemption level of $5.12 million but index it to inflation forfuture years. And it would raise the top rate to 40% from 35% currently.”
Anynegotiated agreement made at the very last minute (literally) by idiots likethe members of Congress is bound to be at the very least flawed, if notactually bad.
Myconcern is that in making the bulk of the provisions “permanent” will give theAdministration an excuse to avoid tackling serious and substantive tax reformin 2013 (or through 2016) as had been hoped for (at least by me) – since thereis no looming expiration deadline.
Iguess a permanent AMT patch is better than annual one-year patches – but neitherare better than doing away with the dreaded AMT altogether as part of anoverhaul of the convoluted Tax Code.
Therewere some temporary aspects of the bill – the American Opportunity Credit,Child Tax Credit, and the Earned Income Credit, all with refundable components,for 5 years. A clear sign that the TaxCode will continue to be improperly used as a vehicle to distribute social welfarebenefits. And the excessive tax fraud that results from refundble tax credits will continue for at least another 5 years.
The bill seems to bring back “Pease-like” limitations on itemized deductionsfor the “wealthy” (although these victims are less wealthy than thosehit by the increased tax rate). I amagainst any kind of cap or phase-out of itemized deductions in general, andwould rather remove some of the actual deductions.
Andthe popular “extenders” have been extended for “one or two years”. As longas the idiots were making things permanent what is wrong with these?
AsI said in my previous post it ain’t over till it’s over. I do not hear the fat lady warming up. The big challenge to this agreement is theHouse, who will either accept, reject, or revise (most probably revise) theSenate bill. And then there is theConference Committee, and the beat goes on.
Onthe 2013 withholding front ACCOUNTING TODAY reported this morning that -
“The Internal Revenue Service released newincome tax withholding tables for 2013 late Monday to reflect the expiration ofthe 2001 and 2003 Bush tax cuts and the more recent payroll tax cuts of 2011and 2012, but noted that the guidance would be modified if Congress acts.”
And-
“In issuing the guidance, the IRS said ittakes note of the fact that Congress is currently considering legislation thatcould affect these rates. If the legislation is enacted, IRS will issue new,corresponding tables at that time.”
Ihad received an email from Intuit Payroll (Quickbooks) on Friday stating thatit would continue the 2012 withholding tables into 2013 until Congress acts. I trust software companies in general do thesame and wait for the end of this negotiation before revising their programs,so as not to FU withholding.
TTFN
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