Senate Plans to Approve $825 Billion in Tax Cuts to Offer Tax Help to Middle Class
The Senate is expected to approve a 2010 budget that includes $825 billion in tax relief over the next five years.
The budget resolution offers tax help targeted largely to the middle class and would extend the 2001 and 2003 middle-class tax cuts enacted in the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003 over the five-year span of the budget outline.
CCH (http://tax.cchgroup.com/) reports:
The provisions address alternative minimum tax (AMT) relief, estate tax reform, business tax relief and extenders. The budget also assumes the enactment of loophole-closers and enforcement efforts to help close the tax gap, which are estimated to raise $133 billion in additional revenue.
The budget debate dragged on through the night as lawmakers slogged through approximately 100 amendments, some with minor tax implications. An amendment by Sen. Robert F. Bennett, R-Utah, which would prohibit changing current tax law for charitable contribution tax deductions to pay for modernizing the health care system was agreed to by unanimous consent.
The Senate budget resolution includes two deficit-neutral reserve funds for tax relief and tax reform. The provisions call for a reserve fund to promote economic stabilization and growth. The first would accommodate any tax relief, including the extension of expiring provisions and refundable tax credits, some of which were first provided in the economic recovery package, as long as the cost of the tax relief is offset. The second reserve fund would provide for comprehensive tax reform that would ensure a sustainable revenue base for a tax system that promotes simplicity, fairness, and competitiveness.
Deficit-neutral reserve funds’ tax-related amendments approved would: (1) provide for the extension of the top individual tax rates for small businesses after 2010, (2) permanently extend the deduction for state and local taxes, (3) provide a point of order against legislation that has the effect of imposing a greater tax liability on taxpayers who are married than if such taxpayers had filed individual tax returns, and (4) provide for the repeal of the 1993 increase in the income tax on Social Security benefits.
Republican members on April 1 also chipped away at the Democratic-controlled budget process with anti-tax-related amendments that held little clout. Senate Budget Committee Chairman Kent Conrad, D-N.D., put Republicans on notice that their proposals, although approved, would not survive a conference to reconcile the Senate and House versions of the budget. Those include an amendment by Finance Committee member John Ensign, R-Nev., that would create a 60-vote point of order against legislation that would raise taxes on individuals with adjusted gross income (AGI) of less than $200,000 and couples with AGI of less than $250,000. The other, an amendment offered by Finance Committee member John Cornyn, R-Tex., would create a 60-vote point of order against legislation that would raise taxes on small businesses.
In addition, the Senate adopted by voice vote an amendment by Sen. Johnny Isakson, R-Ga., that would create a deficit-neutral reserve fund for future legislation providing a nonrefundable federal income tax credit for the purchase of a primary residence in the amount of $15,000 or 10 percent of the purchase price.
The Senate budget resolution does not include any reconciliation instructions; however, the House budget resolution (HConRes 85) contains an explicit placeholder for reconciliation instructions (TAXDAY, 2009/04/03, C.1). Because the instructions are in the House resolution, they can be added in conference between the House and the Senate, allowing the Senate to pass climate-change or health-care legislation with only a simple majority.
Specific tax provisions in SConRes 13 call for continuation of the 2009 estate tax parameters, with an exemption of $3.5 million, or $7 million for a couple, indexed for inflation and a top rate of 45 percent. Small businesses gain a permanent extension of the Code Sec. 179 expensing provision, including a new proposal to eliminate capital gains taxes for small businesses, going beyond the current 75-percent exclusion. The budget also calls for expanding the net operating loss carryback rules.
For individuals, the budget plan assumes AMT relief through 2012, without offsets. It would also make permanent the 10-percent bracket, the child tax credit, and marriage penalty relief. In addition, it would extend other 2001 and 2003 tax changes for couples with income under $250,000 and singles with income under $200,000, including the 25-percent and 28-percent brackets and the preferential rates for capital gains and dividend income. Similarly, it would extend through 2011 those tax provisions that are slated to expire in 2009 or 2010, but that have been routinely extended in the past. These provisions, or “extenders,” include, among others, the research and experimentation tax credit, the deduction for state and local sales taxes, the deduction for teacher classroom expenses, and the exception for active financing income.
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