TAX CUTS: TEMPORARILY, AT LEAST
May 11, 2006
The House passed the tax reconciliation package (H.R. 4297) yesterday and the Senate is expected to follow tomorrow or Friday. The tax cuts will benefit businesses, investors and about 15 million upper-middle-income taxpayers, says USA Today.
The five-year, $70 billion package pales compared with major tax cuts enacted in 2001 and 2003, which slashed a broader range of taxes by nearly $1.7 trillion over 10 years. Most of the "cuts" are in the form of preventing tax increases, says USA Today.
Highlights of the tax bill:
- Extends for two years, from 2009 through the end of 2010, a maximum tax of 15 percent on capital gains and dividend income. Cost: $20.6 billion over five years.
- Extends for one year, through 2006, Alternative Minimum Tax exemptions for upper middle-income taxpayers. Ensures the AMT doesn't erode eligibility for several tax credits, including the dependent care credit. Cost: $33.9 billion over five years.
- Extends two years, through the end of 2009, a tax cut letting small businesses write off up to $100,000 in investments in equipment and other depreciable assets. Cost: $7.3 billion over five years.
H.R. 4297 also eliminates, starting in 2010, the $100,000 income limitations on converting traditional retirement accounts to Roth IRAs. Money shifted to Roth IRAs would be taxed when converted, raising funds in the short term, but would be withdrawn tax-free at retirement at a significant long-term revenue loss. Revenue raised: $6.4 billion over 10 years.
Source: Richard Wolf, "Congress poised to pass $70B in temporary tax cuts," USA Today, May 11, 2006.
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