It may not sound like it from the rhetoric, but both the House and Senate already have passed separate bills to delay big tax increases awaiting nearly every taxpayer next year if Congress and the White House can’t agree on a plan to avert the “fiscal cliff.”
The Democratic-controlled Senate passed a bill in July that would extend many of the expiring George W. Bush-era tax cuts for middle-income families, while letting taxes go up for individuals who make more than $200,000 and married couples making more than $250,000.
The Republican-led House passed a bill in August that would extend the tax cuts for just about everyone.
Republican leaders in Congress say they are willing to accept higher taxes on the wealthy, but only by reducing or eliminating credits, deductions and exemptions. They adamantly oppose higher tax rates, which Democratic leaders are demanding.
Leaders from each party said their bill should be the starting point for finding a solution in the next few weeks. Both bills would extend tax cuts through next year. The Senate bill would save taxpayers about $250 billion, according to congressional estimates. The House bill would save taxpayers about $400 billion.
A look at the specifics of each bill:
Senate: Extends the Bush tax cuts for middle-and low-income families, while letting the top two income tax rates increase from 33 percent to 36 percent and from 35 percent to 39.6 percent. The 33 percent rate would be applied to income above $200,000 for individuals and $250,000 for married couples filing jointly. The top tax rate is applied to incomes above about $390,000.
House: Extends all the Bush tax rates through 2013, for wealthy, middle-income and low-income families.
Senate: Raises the top tax rate on capital gains and qualified dividends from 15 percent to 20 percent.
House: Keeps the top tax rate on capital gains and qualified dividends at 15 percent.
Neither bill addressed the payroll tax cut, which reduced the Social Security payroll tax paid by workers from 6.2 percent to 4.2 percent in 2011 and 2012. If the tax cut expires, a typical worker making $50,000 in wages would get a $1,000 tax increase next year.
Senate: Does not address the estate tax, allowing the top rate to increase from 35 percent to 55 percent. Currently, the first $5.1 million of an estate is exempt from the federal estate tax; the exemption rises to $10.2 million for married couples. If the tax cut expires, the exemption would be reduced to $1 million for individuals and $2 million for couples.
House: Extends the top rate of 35 percent through 2013, with the larger exemption.
Child Tax Credit
Both bills extend the $1,000-per-child tax credit through 2013. If Congress does not act, the tax credit is scheduled to revert to $500 per child next year.
Senate: Extends a 2009 provision that makes the child tax credit available to more families that don’t make enough money to owe federal income taxes.
Earned Income Tax Credit
Both bills extend a more generous credit first enacted under Bush. The EITC provides tax credits to low-income families based on their income and number of children. The credits are available as payments to many families that don’t make enough money to owe federal income taxes.
Senate: Extends a 2009 provision that makes the credit more generous for families with three or more children.
Education tax breaks
Both bills extend more generous tax deductions for interest on student loans and exemptions for employer-provided educational assistance.
Senate: Extends a tax credit of up to $2,500 a year for college costs, first enacted in 2009.
Alternative Minimum Tax
Both bills spare millions of middle-income families from paying the alternative minimum tax for 2012. The tax was first enacted in 1969 to make sure higher-income taxpayers could not use tax breaks to avoid paying any federal income tax. The income limits, however, were not adjusted for inflation, so Congress routinely fixes the law to spare middle-income families.
Congress has yet to patch the law for 2012. So if lawmakers don’t act, about 28 million middle-income families will face unexpected tax increases averaging more $3,000 when they file their 2012 tax returns next spring.
Read more: http://www.pennlive.com/midstate/index.ssf/2012/12/fiscal_cliff_a_look_at_us_hous.html