Tuesday, June 19, 2012

Taxing


Since the evil George Bush's tax cuts for the rich are set to expire, The Heritage Foundation has kindly listed the details of exactly what will expire (and transpire). I've bolded and italiced the specific Bush tax cuts so everybody can see how they are for the rich and just left the others in standard font - there are a lot of other tax cuts and credits due to disappear at the same time.

39.6 percent rate is cut to 35 percent; 36 percent to 33 percent; 31 percent to 28 percent;   28 percent to 25 percent; 10 percent bracket created.

Capital gains rate is cut from 20 percent to 15 percent; dividends from 39.6 percent to 15 percent.

Personal exemption phase-out and limitation of itemized deductions

Child tax credit increased from $500/child to $1,000.

Brackets doubled for all married filers; standard deduction doubled for married filers.

Increase in joint returns beginning and ending income level for phase-out by $5,000 indexed after 2008.

Coverdell Education Savings Accounts, annual contribution limit expanded to $2,000 and other expansions.

Employer-provided educational assistance, which extends the exclusion for undergraduate courses and graduate level courses.

Student loan interest deduction:  the 60-month rule eliminated as well as the disallowance for voluntary payments; increased phase-out ranges to $50,000-$65,000 single/$100,000–$130,000 joint.

Taxation of scholarships - this eliminates the tax on awards under the National Health Service Corps Scholarship program and F. Edward Hebert Armed Forces Health Professions Scholarship and Financial Assistance Program.

Tax treatment of bonds for school construction - increased arbitrage rebate exception for governmental bonds used to finance qualified school construction from $10 million to $15 million; issuance of tax-exempt private activity bonds for qualified education facilities with annual state volume caps, the greater of $10 per resident or $5 million.

Dependent care tax credit - increased the credit rate to 35 percent, increased the eligible expenses to $3,000 for one child and $6,000 for two or more children and increased the start of the phase-out to $15,000 of adjusted gross income (AGI).

Adoption credit - increased the expense limit and the exclusion to $10,000 for both non-special needs and special needs adoptions, made the credit independent of expenses for special needs adoptions, extended the credit and the exclusion, increased the phase-out start point to $150,000, and allow the credit to apply to the Alternative Minimum Tax (AMT).

Employer-provided child care credit - 25 percent for child care expenditures and 10 percent for child care resource.

Alaska Native Settlement Trusts  - allowed electing Alaska Native Settlement Trusts to tax income to the trust, not the beneficiaries.

Payroll Tax - employees’ portion of Social Security payroll tax was reduced from 6.2 percent to 4.2 percent.

Alternative Minimum Tax (AMT) - patch raised income threshold over which taxpayers are subject to AMT so it did not impact middle-income taxpayers.

American Opportunity Credit - a refundable tax credit for higher education expenses

Expanded Child Tax Credit -  reduced the earnings threshold for the refundable portion of the child tax credit to $3,000.

Expanded EITC - inncreased the credit’s percentage and increase in joint returns beginning and ending income level for phase-out by $5,000 indexed after 2008.

Incentives for biodiesel and renewable diesel - income tax credits given for producing biodiesel mixture, biodiesel, and agri-biodiesel.

Credit for refined coal facilities, which gave a $6.27/ton income tax credit for the production of refined coal.

Credit for construction of energy-efficient new homes - gave up to $2,000 credit for contractors constructing energy-efficient new homes.

Incentives for alternative fuel and alternative fuel mixtures - gave $0.50/gallon for selling alternative fuels and $0.50/gallon for producing an alternative fuel mixture.

Suspension of limitation on percentage depletion for oil and gas marginal wells - allows owners of wells to deduct more than 100 percent of their net income from a marginal well for depletion.

Grants for specified energy property in lieu of tax credits - taxpayers could elect to receive a grant instead of a credit for property put in place to produce renewable electricity.

Provisions related to alcohol used as fuel - income and excise tax credits for the production and purchase of ethanol.

Credit for energy-efficient appliances - income tax credit for producers of energy-efficient dishwashers ($45–$75/unit), clothes washers ($75–$250/unit), and refrigerators ($50–$200/unit).

Credit for improving the energy efficiency of a home 30 percent credit for the purchase of energy-efficiency improvements to a home’s envelope, including insulation, exterior windows, and roofing materials.

Alternative fuel vehicle refueling property - a 30 percent income tax credit for the cost of installing clean-fuel vehicle refueling property to be used in a business or at a home.

$250 deduction for teacher classroom expenses, which allowed educators can deduct up to $250 for books, supplies, computer equipment and other materials used in the classroom.

Deduction for state and local sales taxes - taxpayers could choose to deduct their state and local sales taxes instead of their state income taxes—mostly used by taxpayers living in states without an income tax.

Contribution of capital gain real property made for conservation purposes - removed the limitation on deductions for income, estate, and gift taxes for charitable contributions of appreciated property for the purpose of conservation.

Deduction for qualified tuition and related expenses - deduction for higher education tuition and expenses.

Tax-free distributions from IRAs to charities - withdrawals from traditional IRAs are usually taxable because the taxpayer did not pay tax on the income before contributing it to the IRA. This provision allowed taxpayers to deduct charitable donations made with funds from their IRAs the same had they made the donation before putting their income in an IRA.

Look-thru for certain regulated investment company stock in determining gross estate for nonresidents -
allowed estates of nonresidents who pass away to remove from their estates the portion of assets held outside the U.S. within regulated investment corporations.

Parity for exclusion from income for employer provided mass transit and parking benefits -employers could provide up to $120/month to employees tax free for mass transit and bicycling costs and $230/
month for parking. As part of the stimulus, the exclusion from income for mass transit was raised to equal the parking exclusion ($230/month).

Refunds disregarded in the administration of federal programs and federally assisted programs - refundable tax credits were not considered in a person’s income when applying for welfare programs.
 
Research and experimentation credit - a 20 percent credit for research expenses.

Indian employment tax credit - a credit for employers that hire an enrolled member of an Indian tribe or the spouse of an enrolled member of an Indian tribe.

New markets tax credit - a credit for equity investment in a corporation whose mission is providing investment capital for low-income communities.

Railroad track maintenance credit 50 percent credit for railroad track maintenance costs.
Mine rescue team training credit - a credit for amount paid to mine rescue team employees.

Employer wage credit for activated military reservists -a credit of 20 percent for employers of the amount above their employees’ military earnings they pay them while they are on active duty.

15-year straight-line cost recovery for qualified leasehold, restaurant, and retail improvements and new restaurants - allows businesses to deduct from income investment in restaurant and retail properties over 15 years rather than the 39 years under standard depreciation rules.

Seven-year recovery period for certain motorsports racing track facilities -allows motorsports entertainment complexes to deduct from income investment in property over seven years rather than the 39 years under standard depreciation rules.

Accelerated depreciation for business property on an Indian reservation - allows businesses on Indian reservations to deduct from income investments in property (not related to gaming) faster than under standard depreciation schedules.

Enhanced charitable deduction for contributions of food inventory - extends to all businesses that donate food from inventory to charitable organizations a deduction greater than the business’s cost for the items donated.

Enhanced charitable deduction for contributions of book inventories to public schools - extends charitable deduction of books from inventory to include public schools.

Enhanced charitable deduction for corporate contributions of computer inventory for educational purposes - allows businesses that donate computers to charitable organizations a deduction greater than their cost for the computer items donated.

Election to expense mine safety equipment - allows businesses to immediately expense 50 percent of the cost of mine safety equipment.

Special expensing rules for certain film and television productions - allows taxpayers to deduct the cost of film and television production immediately rather than over a number of years.

Expensing of environmental remediation costs - provides immediate expensing for environmental remediation expenditures.

Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico -
extends the domestic manufacturing production credit to income earned from sales in Puerto Rico.

Modify tax treatment of certain payments to controlling exempt organizations - pertains to the tax treatment of non-taxable businesses. Income unrelated to an exempt organization’s mission is generally taxable. Interest, rents, royalties, and annuities are usually excluded, however, unless they are paid by a
controlled subsidiary (taxable or non-taxable). This provision alters that to make such payments taxable only to the extent the payment exceeds what the payment would have been had it been between two unrelated businesses.

Treatment of certain dividends of regulated investment companies - foreigners holding investments in the U.S. through regulated investment companies (RIC) are exempt from tax on dividends earned through the RIC from interest and short-term capital gains.

Extend the treatment of RICs as “qualified investment entities” - provision insures that foreigners holding investments in the U.S. through RICs are exempt from tax on real property interests held in RICs.

Exception under subpart F for active financing income - exempts from current tax active foreign-source income earned from banking, financing, insurance, or other similar business that would otherwise qualify for immediate tax under subpart F income rules.

Look-thru treatment for payments between related controlled foreign corporations under foreign personal holding company rules - exempts from current tax dividends, interest, rents, and royalties received by one controlled foreign corporationfrom another controlled foreign corporation.

Basis adjustment to stock of S corporations making charitable contributions of property - allows shareholders of S corporations to reduce their share value by the adjusted basis of property donated to a
charity rather than the property’s fair market value.

Empowerment zone tax incentives - employment tax credit, accelerated depreciation, tax-exempt bond financing, and deferral or exclusion of capital gains tax for businesses that operate in federally designated empowerment zones.

Tax incentives for investment in the District of Columbia - employment tax credit, accelerated depreciation, tax-exempt bond financing, and deferral or exclusion of capital gains tax for businesses that operate in federally designated areas of the District of Columbia.

So this is what will disappear from U.S. wallets, in MILLIONS:

Bush tax cuts $165,750
Payroll tax cut $124,636
Alternative Minimum Tax (AMT) patch $118,750
Tax cuts from 2009 stimulus $20,876
Tax extenders $20,465
Death tax at 35 percent with $5 million exemption $13,000
100 percent expensing for business investment $7,695

In addition, these tax policies will begin on January 1, 2012:

Tax hikes in Obamacare $22,750

Total = $494,000.  Remember, that's in MILLIONS.

That means a whopping increase in taxes, shown by average here:

Lots more detail out at Heritage Foundation's web site, including breakdowns within states.

8 comments:

  1. Ouch! Thanks for the info PH.

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    1. Serious ouch. And I'm not sure if this even addresses the trickle down effect from businesses having to increase cost to customer.

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  2. Lovely. My tax increase will be the equivalent of a year's worth of car payments on a fairly nice car..which I will not get to drive.
    Money down the toilet.

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    Replies
    1. Yeah. I don't want a new car, either. I just don't want to come up shorter in my paycheck.

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  3. Yup, lot's and lot's of middle class stuff about to go poof!

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    Replies
    1. It's going to cut into my beer purchases...

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  4. Scary, and if you take 3-4000 out of folks pockets, you are DEFINITELY impacting their lifestyle...

    ReplyDelete
    Replies
    1. Which trickles down - it takes 3-4000 out of local businesses pockets, affecting their bottom line. Which in turn is going to affecting hiring/firing.

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