WASHINGTON - Senate leaders locked horns yesterday over competing proposals for extending the 2001 and 2003 tax cuts enacted by President George W. Bush.
Without action by Congress, trillions of dollars in tax cuts will expire on December 31, and trillions more in tax increases will take effect under the new health-care law and trillions in automatic spending cuts will begin. Some of the significant tax-cut provisions that will expire at the end of the year are:
- The estate tax increases to 55% from the current 35%, and the $5 million exemption reduces to $1 million
- The 10% tax bracket expires, reverting to 15%
- The child tax credit falls from $1,000 to $500
- The tax rate on long-term capital gains increases from 15% to 20%
- The tax rate on qualified dividends increases from 15% to ordinary wage tax rates
- The 25% tax rate increases to 28%
- The 28% rate increases to 31%
- The 33% rate increases to 36%
- The 35% rate increases to 39.6%
Roll Call writes that Senate Democrats support extending the tax cuts for those who make less than $250,000 a year, which they argue would bring fairness to the tax code for the middle class. Republicans, however, want to vote on a yearlong extension for everyone, saying it would give Congress more time to reform the tax code.
On the Senate floor, Senate Minority Leader Mitch McConnell (R-KY) called for a vote President Obama€™s tax plan, which would extend the Bush tax rates for families earning less than $250,000, along with the GOP plan for a yearlong extension. Majority Leader Harry Reid (D-NV) rejected the request.
Instead, Reid urged Republicans to support Democrats in passing the Small Business Jobs and Tax Relief Act, which the Senate began debating yesterday. Reid said the bill would help create 1 million jobs, provide a 10% income tax credit on new payroll added in 2012 (through hiring or increased wages) and extend bonus depreciation for one year, "allowing businesses to write off the entire cost of major purchases in the year they are made rather than depreciate those expenses over many years," notes the newspaper.