HOW TAX RELIEF WORKS
November 15, 2005
In recent months, many Democrats and a handful of Republicans have called for increased taxes: They're wrong. Tax relief has worked and we need to extend it, says Senate Majority Leader Bill Frist (R-Tenn.).
Three important tax-relief provisions expire over the next few years, and unless we extend them, Americans will face an automatic stealth tax increase, says Frist. They are:
- Enhanced small business expensing, which allows smaller enterprises to charge their capital investments against income, has lead to a record $210 billion in small business capital expenditures -- an increase of more than 15 percent since 2002.
- Lower taxes on capital gains and dividends, which has helped even modest income taxpayers -- nearly half of all income tax returns that reported capital gains and dividend income come from households with adjusted gross incomes of less than $50,000.
- Extending the exception to the alterative minimum tax (AMT); otherwise, this tax, originally intended to make sure that the very rich paid the government something, will start to hit the middle class.
According to Frist, this year, fewer than 4 million people -- most of them very well off -- will pay the AMT. However, if Congress doesn't act, an additional 17 million will be affected next year.
In Nashville, Tenn., for example, a nurse and a high school teacher earning the average wage for their professions will wake up on Jan. 1, 2006, to find out that the IRS has decided that they are "rich" and may have to pay the AMT.
Source: Bill Frist, "How tax relief works," Washington Times, November 15, 2005.
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