Lame Duck Congress Addresses Expiring Bush-era Tax Cuts, the Alternative Minimum Tax, and Tax Reform for the Upcoming Tax Year
With only a few months left until the 2011 tax filing season, Congress seeks to come to decisions regarding Federal Income Tax, specifically addressing issues such as the Alternative Minimum Tax (AMT) and the expiration of the Bush-era tax cuts. After lawmakers return to Washington on November 15, 2010, they have a four week “lame duck” period to address tax issue and appropriations.
If left unaddressed by Congress, the AMT imposes an additional obligation on 25.2 million taxpayers in 2010, whereas this obligation was only paid by 3.8 million in 2008. The Senate Finance and House Ways and Means Committees have proposed a means to address this issue. The proposed AMT patch for 2010 raises the exemption level from $33,750 to $47,450 for individuals and from $45,000 to $72,450 for couples filing jointly. This exemption is estimated to prevent 21 million taxpayers from being affected by the AMT.
December 31, 2010 also marks the expiration of the Bush-era tax cuts. These include the overall 10 percent reduction on all individual tax rates, the 15 percent rate for capital gains and dividends, the increase in the child care credit, the increase in the dependent care deduction, and the repeal of the personal exemption phaseout. Many members of Congress, including Democratic Senate Budget Committee Chairman Kent Conrad and Democratic Senator Evan Bayh, have expressed their views that all of the expiring tax cuts should be temporarily extended due to the weak economy. Republican Representative David Camp expressed his desire to permanently extend these cuts, to avoid “seeing a wet blanket thrown over the beginnings of economic recovery.” As the next chairman of the tax-writing panel of the House Ways and Means Committee, Camp plans on focusing his efforts on extending the Bush-era tax cuts.
With respect to tax reform, Camp plans to “look at tax reform with a goal of trying to simplify the tax code and addressing the inequities in the code as well its inefficiencies and burdens.” He also hopes see an increase in the number of oversight hearings over the administration by the Oversight Subcommittee of the House Ways and Means Committee.
The uncertainty among the members of Congress with respect to legislation in tax is likely to increase even more with the Presidents Fiscal Commission Report, scheduled to come out on December 1, 2010. Because there are numerous issues on the lame duck Congresss four week agenda, many members have expressed hesitation as to how much will be accomplished. As stated by Evan Liddiard, tax counsel to Senate Finance Committee member Senator Orrin Hatch, “there is a significant chance we can see December 31 come and go without these items being addressed.”
If you have any questions regarding the expiration of the Bush-era tax cuts, the AMT, or any other tax provision, please contact Fuerst Ittleman at contact@fidjlaw.com.