Tue January 1, 2013
Inside The Fiscal Cliff Budget Compromise Bill: Tax Cuts and Tax Hikes
Originally published on Wed January 2, 2013 6:44 am
The budget compromise bill that is meant to allow the U.S. government to avoid higher tax rates and austere budget cuts has tax rates as its central issue, with discussions about more spending cuts, and the federal debt limit, put off until the coming weeks.
Now that NPR and other organizations have had some time to look at the compromise, we can list some of the proposed effects contained in the Senate bill that the House began considering Tuesday. This list isn't exhaustive — we're including links to other analysis below. But here's some of what the proposed deal would do:
- Extend tax cuts for income below $450,000 (couples) and $400,000 (single filers)
- Above those thresholds, raise the income tax rate from 35 percent to 39.6 percent, while capital gains and dividends rates go to 20 percent, from 15.
- Begin a two-month delay on the automatic $109 billion cuts to defense and non-defense spending.
- Extend and alter the tax credit for businesses' research and development.
- Patch the Alternative Minimum Tax to make annual fixes unnecessary for 10 years.
- Raise the highest rate on estate taxes to 40 percent, while keeping the current $5 million per person exemption.
- Extend federal benefits for long-term unemployed Americans by one year.
- Extends the child tax credit, as well as the child and dependent care credit, depending on income.
- Allow more conversions to Roth IRAs (which would bring in revenue, as it requires tax payments up front).
- Extend the farm bill for a year (avoiding the "milk cliff" crisis).
- Bring back limits on personal exemptions and some itemized deductions, for incomes of $300,000 (households) and $250,000 (singles).
- Postpone a planned 27 percent cut to Medicare payments to doctors.
You can review the nonpartisan Joint Committee On Taxation report of the Senate bill online, in PDF form. For more of a boiled-down look at the costs and savings — and, we warn you, all comparisons depend upon which set of projections you use for a base level — the bipartisan Committee for a Responsible Federal Budget has a handy chart.