eyesore sipped: Bush tax cuts: What you'd pay under rival plans

Thursday, July 26, 2012

Bush tax cuts: What you'd pay under rival plans | Top iPad Finance ...

Tax plans from Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell epitomize the diviide between Democrats and Republicans when it comes to taxes in 2013.

NEW YORK (CNNMoney) ? Congress starts voting this week over competing proposals for how to extend the Bush tax cuts.

None of them is likely to be enacted as is ? nor is the debate likely to be resolved before the November elections at the earliest.

But the proposals frame the terms of a fight that will be waging for months.

And at stake are the tax bills of millions of Americans.

Competing proposals: Senate Democrats have proposed to extend all the Bush tax cuts for one year on income up to $ 200,000 for individuals ($ 250,000 for married couples).

Democrats would also extend the 2009 expansion of a few tax credits for low-income and middle-income Americans, including the earned income tax credit, the child tax credit and the American Opportunity tax credit.

High-income households would see their top two income tax rates increase to 36% and 39.6%, from 33% and 35% today. Their ability to benefit from certain tax breaks would be limited. And their tax rates on capital gains and dividends would increase to 20% from 15% now.

Democrats dropped a provision that would have re-set estate tax parameters at 2009 levels, under which one could exempt up to $ 3.5 million of an estate and face a top rate of 45% on the taxable portion. Otherwise, the exemption level is set to fall to $ 1 million next year and the top rate would rise to 55%.

Senate Republicans, meanwhile, have proposed a full one-year extension of the Bush tax cuts, including the lower rates on investment income. They do not, however, continue the 2009 expansion of the low- and middle-income tax breaks included in the Democratic plan.

Republicans would extend the current estate tax, which allows for a $ 5 million exemption level and imposes a top rate of 35%.

Both parties would offer protection for the middle class from the Alternative Minimum Tax, although the Democrats? plan only does so for 2012, while Republicans would provide it for both 2012 and 2013.

Bottom line under GOP plan: Under the Republican proposal, 15.4% of households would see tax increases, but the increases would primarily hit people making under $ 80,000, according to a new analysis from the independent Tax Policy Center.

Drilling down, 20% of households making less than $ 48,000 would see average tax increases as high as $ 958.

Another 14% in the middle of the income scale (roughly between $ 48,000 and $ 80,000) would pay an average of $ 783 more than they do today.

At the very high end of the income scale ? at least $ 600,000 ? less than 0.05% would see a tax increase.

Bottom line under Democratic plan: The breakdown gets more complicated for the Democrats? proposal because it doesn?t include protection from the AMT for 2013, even though the going assumption is that Democrats would eventually back such a patch.

The AMT is supposed to hit wealthy filers, but without a patch it would hit tens of millions of non-wealthy households. That?s why Congress regularly passes one on a bipartisan basis.

How much of a difference does the patch make? Without it, 23% of households would see a tax hike under the Democrats? plan, with the majority of those increases hitting folks making more than $ 80,000 ? at an average of $ 5,323.

But with an AMT patch, only 1.4% of households would see their taxes go up.

For example, no one making less than $ 133,000 would see a tax increase, according to the Tax Policy Center analysis. And only 9.4% of those in the top quintile of households would pay more.

Within the high-income groups, only half a percent of those making between $ 180,000 and $ 252,000 would have a bigger tax bill, owing an average of $ 25,286 more.

Roughly a fifth of those making between $ 252,000 and $ 600,000 would owe more, paying an additional $ 5,358 on average.

And the vast majority of people making more than $ 600,000 would have higher taxes, and they would pay $ 62,608 more on average.?