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Here’s a run-down of what was in the budget/tax compromise reached by Congress earlier this week:
Tax rates: The bill permanently extends all of the Bush tax cuts for incomes below $400,000 for individuals and $450,000 for families, while reinstating the Clinton-era 39.6 percent tax rate for income above those thresholds.
Capital gains and dividends: Taxes on investment income will be permanently set to 20 percent for income above $400,000 for individuals and $450,000 for families. The rate will stay at 15 percent for everyone else.
Stimulus tax credits: Three middle class tax credits that were expanded as part of the stimulus will be extended for five years. The America’s Opportunity Tax Credit, Child Tax Credit, and Earned Income Tax Credit collectively benefit nearly 20 million Americans each year.
Unemployment insurance: The federal unemployment insurance program will be extended for one year. Without an extension, more than 2 million would lose benefits at the beginning of 2013, while another million would lose them in the early part of the year.
Estate tax: The estate tax was set to revert to its Clinton-era levels, where it was taxed at 55 percent after a $1 million exemption. This deal would set the exemption at $5 million and tax at a 40 percent rate after that — at a cost of $375 billion over 10 years compared to the Clinton level.
Limits on tax exemption and deductions: Limits were reimposed on tax exemptions and deductions for higher-income Americans. The Personal Exemption Phaseout (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) starts at $300,000.
Alternative Minimum Tax: The deal would also include a permanent fix to the Alternative Minimum Tax; which would have hit 30 million additional Americans, many in the middle class.
Business tax extenders: A whole host of business tax extenders; including wind tax credit extended for a year.
Doc Fix: A one-year “doc fix,” which would prevent cuts in provider payments through Medicare. It also extends certain corporate tax provisions for another year.
Sequester: The sequester will be delayed for two months. The delay will be offset by discretionary cuts, split between defense and non-defense (half) and by revenue raised by the voluntary transfer of traditional IRAs to Roth IRAs (other half).
Payroll tax cut: The payroll tax cut expired. Republicans have opposed extending the payroll tax cut in the past; many Democrats opposed its extension over fears that it would undermine Social Security, which it helps fund.
Debt Ceiling: The debt ceiling was not addressed in this package.
Courtesy of http://www.theaction.org/
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