Capital Compromise – avoiding the fiscal curb.
The Bush tax cuts permanent on incomes up to $400,000 for individuals, $450,000 for couples.
An extension of unemployment benefits,
Five-year extensions of the
American Opportunity Tax Credit.
The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It will remain at 15 percent for everyone else. (Clinton-era rates were 20 percent for capital gains and taxed dividends as ordinary income, with a top rate of 39.6 percent.)
The estate tax will be set at 40 percent for those at the $450,000/$400,000 threshold, with a $5 million exemption. That threshold will be indexed to inflation.
The sequester will be delayed for two months. Half of the delay will be offset by discretionary cuts, split between defense and non-defense. The other half will be offset by revenue raised by the voluntary transfer of traditional IRAs to Roth IRAs, which would tax retirement savings when they’re moved over.
The Alternative Minimum Tax will be permanently patched to avoid raising taxes on the middle-class.
Two limits on tax exemptions and deductions for higher-income Americans will be reimposed: Personal Exemption Phaseout (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000.
The full package of temporary business tax breaks—benefiting everything from R&D and wind energy to race-car track owners—will be extended for another year.
Scheduled cuts to doctors under Medicare would be avoided for a year through spending cuts that haven’t been specified.
(The bill also includes a nine-month farm bill extension, cleaning up after another House Republican fiasco resulting from its failure to pass a farm bill. This extension would avert what’s been dubbed the “milk cliff,” a reversion in price supports for dairy farmers to a 1948 law that could have resulted in milk prices to consumers more than doubling.
What it doesn’t do, and what will immediately hit millions of wage earners, is extend or replace the payroll tax cut with an equivalent tax break. That means that all wage earners will see an immediate hit in their paychecks, with a two percent payroll tax increase. That’s a two percent tax hike on 98 percent of the nation).