(CNSNews.com) – Senate Finance Committee Chairman Max Baucus (D-Mont.) has introduced a bill that would enshrine tax increases sought by the Obama administration into law this year – one year ahead of schedule.
Baucus, the Senate Democrat who already is spearheading major liberal initiatives on health care and energy, said the effort would reassure tax-wary Americans that Congress is committed to keeping most of the Bush-era tax cuts in place.
“Today we’re offering a piece of certainty during an uncertain time for millions of hardworking, honest Americans,” Baucus said Thursday in a statement marking the bill’s introduction. “These measures are not excessive or outrageous, but timely and targeted, and will build on earlier efforts to stabilize the economy.”
Baucus’ bill would fulfill Obama’s campaign promise to both keep Bush’s tax rates in place for most Americans and raise both income taxes and capital gains taxes on top producers.
The Senate proposal would make permanent Bush’s tax cuts on those making less than $200,000 a year and raise taxes on those making above $200,000 in 2010. It also would make permanent the reductions in the capital gains tax rate for lower income brackets while raising them in 2010 for the two highest ones.
The measure makes permanent the 10-, 25-, and 28-percent tax rates enacted under President Bush while raising the 33- and 35-percent rates to 36 and 39.6 percent in 2010. The bill would mark the first time taxes have been deliberately raised since the 1990’s.
The bill would keep the issue of tax increases out of next year’s congressional election cycle, denying Republicans the opportunity to attack Democrats while many are campaigning for re-election.
Many thought the issue wouldn’t be taken up until next year when the lower Bush tax rates would have reverted to the higher rates the nation faced under President Bill Clinton; Baucus’ bill allows Congress to deal with the issue without the pressure of impending – and politically toxic – mass tax increases.
The income levels affected by Obama’s tax increases would be slightly less than the $250,000 the president has said. The 33 percent tax bracket applies to those couples with a taxable income between $208,000 and $372,950.
The 35-percent bracket applies to all families with taxable income above $372,950. Obama has said that he doesn’t want anyone with taxable income below $250,000 to face higher taxes.
On capital gains – money made from stock market investments – Baucus’ legislation would keep the 15-percent tax rate for taxpayers in the 25- and 28-percent income tax brackets and the zero percent rate for filers in the 10 and 15 percent income tax brackets.
Capital gains tax rates would rise to 20 percent in 2010 for filers in the 33- and 35-percent brackets and stock dividends would again be taxed as regular income. Currently, dividends are treated as capital gains for tax purposes, a policy that would end in 2010.
If passed, the bill would also enshrine other Bush-era tax policies voters have looked on favorably.
The child tax credit would be permanently set at $3,000, with up to a $6,000 credit for two children. The adoption credit would permanently set at a maximum of $10,000 per eligible child. The popular Earned Income Tax Credit would be permanently increased to 45 percent for filers with three or more children.
The toxic Alternative Minimum Tax (AMT) would be permanently indexed for inflation, with exemptions permanently set at $46,700 for individuals and $70,950 for joint filers.
The AMT provision is especially important because the tax – originally targeted only at the highest income earners – has gobbled up increasing numbers of middle class Americans as they have gotten wealthier, forcing them to pay significantly higher taxes.
Finally, the bill deals with the politically unpopular estate tax. Known as the death tax, the obscure provision often entangles families seeking to pass down family farms and businesses. Baucus’ bill would permanently tax estates valued below $3.5 million at 45 percent.
Baucus, the Senate Democrat who already is spearheading major liberal initiatives on health care and energy, said the effort would reassure tax-wary Americans that Congress is committed to keeping most of the Bush-era tax cuts in place.
“Today we’re offering a piece of certainty during an uncertain time for millions of hardworking, honest Americans,” Baucus said Thursday in a statement marking the bill’s introduction. “These measures are not excessive or outrageous, but timely and targeted, and will build on earlier efforts to stabilize the economy.”
Baucus’ bill would fulfill Obama’s campaign promise to both keep Bush’s tax rates in place for most Americans and raise both income taxes and capital gains taxes on top producers.
The Senate proposal would make permanent Bush’s tax cuts on those making less than $200,000 a year and raise taxes on those making above $200,000 in 2010. It also would make permanent the reductions in the capital gains tax rate for lower income brackets while raising them in 2010 for the two highest ones.
The measure makes permanent the 10-, 25-, and 28-percent tax rates enacted under President Bush while raising the 33- and 35-percent rates to 36 and 39.6 percent in 2010. The bill would mark the first time taxes have been deliberately raised since the 1990’s.
The bill would keep the issue of tax increases out of next year’s congressional election cycle, denying Republicans the opportunity to attack Democrats while many are campaigning for re-election.
Many thought the issue wouldn’t be taken up until next year when the lower Bush tax rates would have reverted to the higher rates the nation faced under President Bill Clinton; Baucus’ bill allows Congress to deal with the issue without the pressure of impending – and politically toxic – mass tax increases.
The income levels affected by Obama’s tax increases would be slightly less than the $250,000 the president has said. The 33 percent tax bracket applies to those couples with a taxable income between $208,000 and $372,950.
The 35-percent bracket applies to all families with taxable income above $372,950. Obama has said that he doesn’t want anyone with taxable income below $250,000 to face higher taxes.
On capital gains – money made from stock market investments – Baucus’ legislation would keep the 15-percent tax rate for taxpayers in the 25- and 28-percent income tax brackets and the zero percent rate for filers in the 10 and 15 percent income tax brackets.
Capital gains tax rates would rise to 20 percent in 2010 for filers in the 33- and 35-percent brackets and stock dividends would again be taxed as regular income. Currently, dividends are treated as capital gains for tax purposes, a policy that would end in 2010.
If passed, the bill would also enshrine other Bush-era tax policies voters have looked on favorably.
The child tax credit would be permanently set at $3,000, with up to a $6,000 credit for two children. The adoption credit would permanently set at a maximum of $10,000 per eligible child. The popular Earned Income Tax Credit would be permanently increased to 45 percent for filers with three or more children.
The toxic Alternative Minimum Tax (AMT) would be permanently indexed for inflation, with exemptions permanently set at $46,700 for individuals and $70,950 for joint filers.
The AMT provision is especially important because the tax – originally targeted only at the highest income earners – has gobbled up increasing numbers of middle class Americans as they have gotten wealthier, forcing them to pay significantly higher taxes.
Finally, the bill deals with the politically unpopular estate tax. Known as the death tax, the obscure provision often entangles families seeking to pass down family farms and businesses. Baucus’ bill would permanently tax estates valued below $3.5 million at 45 percent.