After intense negotiations lawmakers passed the American Taxpayer Relief Act of 2012 (the “Act”) by a vote of 257 to 167. Many disgruntled Republican lawmakers sought to amend the tax-cut measure to also include a package of spending cuts, but lack of support caused the push to be discarded. Many believe it is likely the GOP amendment would have killed the bill, which President Obama has promised to sign.
The Senate passed the Act by a vote of 89 to 8, following a last-minute agreement reached between Senate Minority Leader Mitch McConnell, R-Ky., and Vice President Biden. The Joint Committee on Taxation estimated that the legislation would lower federal revenues over the next 10 years by some $3.9 trillion. The passage of the Act averts the consequences from the so-called fiscal cliff of expiring Bush-era tax cuts and the imposition of spending cuts enacted by the Budget Control Act of 2011. Despite missing the January 1 deadline, lawmakers seemed determined to reach a resolution before the U.S. stock markets opened following the New Year’s Day holiday.
The Act extends the Bush-era tax cuts for individuals annually earning under $400,000 ($450,000 for couples), increases the estate tax rate to 40 percent while maintaining an exemption for estates valued under $5 million, provides a permanent patch for the alternative minimum tax (AMT), and taxes dividends and capital gains at 20 percent for individuals earning over $400,000 ($450,000 for couples).
The Act extends business tax breaks (the research and experimentation credit and the production tax credit) and personal tax credits (including the child care, college tuition and the Earned Income Tax Credit). The Act also delays some budget spending cuts for two months and extends long-term unemployment insurance benefits for one year.
Democrats supported passage of the tax legislation, but several predicted GOP lawmakers would use the federal debt limit debate as leverage to pass deeper spending cuts. GOP lawmakers fear the lack of spending cuts in the Act could send the message that Washington is not willing to address the deficit which may lead to a lower credit rating. With the Cliff behind us we can now watch as lawmakers gear up for debates on the Ceiling.
Dopkin Law Firm advises clients on the intricacies of business and tax law matters. To discuss these or other issues with attorney and CPA Matt Dopkin, contact us at 215-519-4269 or via email at email@example.com.
© 2012 Dopkin Law Firm
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