Understanding the Deal: Everything you need to know after the “Battle of the Cliff” and more!

From Jobs-Not-Wars Campaign

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Understanding the Deal

The Jobs-Not-Wars Campaign has sharedresources that help explain the nature and impact of the deal that was cut between the White House and Congressional leadership.  As more information becomes available, the Campaign will provide those resources. Here is the link to the legislative text of the deal:
http://www.scribd.com/doc/118551686/Mat-12564

Brief summary:
– UI extended for one year

– income tax rates go up on income starting at $400,000 for individuals,
$450,000 for joint filers

– limits on personal exemptions in existence in Clinton years restored
starting at $250k; limits on itemized deductions restored starting at
$300,000.

– Estate tax rate goes up from current 35% to 40%, but level below which
estates are exempt stays the same ($10m for couples; $5m for
individuals) now but is INDEXED FOR INFLATION! so expected to rise to
$15m for couples in 2020.

– Capital gains and dividends taxes rise from 15% to 20%.

– Refundable credits (Child Tax Credit, EITC, American Oppty Tax Credit)
extended for 5 years; all other Bush income tax cuts made permanent).

– Tax cut “extenders” extended for one year (usual list:  Research and
Development, non-refundable education credit, many business credits,
low-income housing construction credit…)

– Permanent fix for AMT (Alternate Minimum Tax).

– Sequester cuts postponed until March; cost of delay paid for with $12b
from revenue gained from voluntary transfer of traditional IRA’s to Roth
IRA’s and $12b from unspecified cuts, half from Pentagon and half from
domestic discretionary.

– Medicare “doc fix” (SGR) for a year.

– Makes permanent the provision disregarding tax refunds from
means-tested benefit programs (not counted as income, and disregarded as
resources for 12 months)

– Tax extenders includes both the above the line tuition deduction (sec
207) and the WOTC (sec 309), both retroactive to cover 2012 as well as
2013.
– Extends transitional medical assistance (TMA) through 2013. (sec 622)

– Extends Express Lane Eligibility for Medicaid and CHIP — I think
through 2014, but would need to check the underlying law (sec 623)

– Extends Farm Bill through September — no SNAP cuts.  E&T is funded
at $79 million, as it has been the past few years. (Title 7)


January 1, 2013, 12:17 a.m. ET
Details of Tax Law Changes Spelled Out
Wall St. Journal
By LAURA SAUNDERS

The tax changes included in the bill hashed out between the White House and congressional Republicans Monday includes the first increases in top income-tax rates in nearly two decades. They also set new thresholds for determining who is “rich,” while leaving most people’s tax rates unchanged.

“It appears nearly 99% of the population would see little or no change in their income taxes for 2013,” said Roberton Williams, an economist at the Tax Policy Center in Washington.

It is unclear how large tax increases will be for the 1%, he said, as important details have yet to be released. And the measure hashed out by Senate Minority Leader Mitch McConnell (R., Ky.) and Vice President Joseph Biden still must be approved in both the Senate and the House, where passage can’t be assured.

For millions of wage earners, the most immediate effect would be the lapse of a two-percentage-point payroll-tax cut that was part of a deal President Barack Obama struck with Republicans late in 2010. It lowered to 4.2% from 6.2% the employee portion of the Social Security tax, allowing workers to keep more take-home pay.

For an individual earning the maximum 2013 cap of $113,700 or more, the increase would be nearly $200 per month. Overall, the expiration of this stimulus would cost working Americans $125 billion a year, according to J.P. Morgan Chase JPM +1.69% .

Beyond that, it will take up to four weeks after a bill is passed for many workers to know exactly what their 2013 take-home pay will be, according to Michael O’Toole, an official of the American Payroll Association, a group of 21,000 payroll managers.

Just before midnight, the Internal Revenue Service issued new withholding tables for 2013 reflecting the expiration of the 2001-3 tax cuts and the two-percentage point Social Security tax cut. But the IRS noted that the tables might change given pending legislation.

The 2013 tax-filing season also is likely to be disrupted by Washington’s wrangling on deadline. In November, acting Internal Revenue Service Commissioner Steve Miller warned that the filing season would be delayed by several weeks. Normally the season opens in mid-January, but this year it may be delayed till mid-February or later.

As a result, many filers won’t be able to receive tax refunds as early as they normally do. “Congress’s delays have pushed back the repayment of interest-free loans to the government for millions of taxpayers,” said Lawrence Gibbs, a former IRS Commissioner now with the Miller & Chevalier law firm in Washington. The average refund is approaching $3,000, according to IRS data.

Fiscal Cliff NEWS & LINKS
Summary of the Bill’s Tax Provisions
Deal’s Likely Impact: More Slow Growth
Deal Leaves Lawmakers With More to Do
CEOs’ Deficit Push Falters in Political Echo Chamber

Restoration of the 2% Social Security Payroll Tax Affects the Rich Less than the Rest of Us

The deal reached between Vice President Joe Biden and Senator Mitch McConnell, which was approved by the Senate on the last day of the year, will include the expiration of the 2% payroll tax holiday and an increase from 35% to 39.6% for individual income over $400,000.  But regular Americans will face higher tax increases than much/most of the top 2%. That’s due to the failure to replace the payroll tax holiday with something like Make Work Pay.  See the chart below, based on individual incomes in 2013.

Restoration of the 2% payroll tax that funds Social Security benefits only applies to incomes up to $113,700.  Not payroll taxes are paid on incomes in excess of that.  That means that the majority of Americans who don’t earn anything even close to that upper limit will pay the full 2% while those who earn much more will pay a declining percentage of their incomes in payroll taxes.  The higher the income, the smaller percentage is paid in payroll taxes.

Monday, December 31, 2012
New Year means tax increases to pay for health care law

New Year Health tax increase click photo to read story

Obama’s tax threshold concession bodes ill for debt ceiling talks

President Obama

The president won re-election promising to raise taxes on those earning more than $250,000. Now he’s already capitulating

January 1, 2013, 8:48 am

Perspective on the Deal

krugman_mainclick here

An Ugly Deal

By Robert Borosage | January 1, 2013
Early this morning, the Senate passed the fiscal cliff deal by 89-8, a margin virtually guaranteeing that it will survive in the House. The deal has some good parts. It lets the Bush tax cuts expire on the wealthy, raises the estate tax marginally and increases taxes on capital gains and dividends a bit. Unemployment benefits are extended for a year. Tax boosts for the low paid workers – the child tax credit, expanded earned income credit, refundable tuition tax credits – are extended, if only for five years. Social Security, Medicare and Medicaid are not touched.

But no one should be fooled. This is an ugly deal, with foul implications for the coming months.
READ MORE

PROGRESSIVE GROUPS DENOUNCE POTENTIAL OBAMA TAX GIVEAWAY TO THE RICH

Progressive Change Campaign

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