ICFiles
SOC 2
Secure File Transfer Soc 2 starts at $1 per month
What Are They Up To Now?
Tax and Financial News
March 2001
What Are They Up To Now?
On January 20, 2001, the United States of America began a new historical era â The Bush II Era. As with most new eras, Bush II promises to bring with it a new perspective on everything in government from taxes to regulation.
While our elected representatives will decide the ultimate shape of our tax system, the bottom line is that it is we, as U.S. citizens, have the right and duty to let our representatives know what we think about the proposals currently before Congress. With that in mind, we thought we might give you a flavor of the various proposals floating around Washington that affect your taxes and we promise to be non-partisan.
Since he is the top elected official in the country, we will start with President Bushâs proposal. As you may have heard, the Presidentâs proposal would reduce income and estate taxes by approximately $1.6 trillion. The major provisions are:
This article is not intended to be an exhaustive analysis of any tax plan, but we would be remiss if we didnât point out one major area the Bush plan does not address â The Alternative Minimum Tax (âAMTâ). This is, in essence, a tax that is computed as if certain itemized deductions are reduced or eliminated and adjusts certain âpreferentialâ tax deductions.
Unlike the provisions of the income tax code, the various exemption amounts in the AMT are not adjusted for inflation. Thus, even before accounting for the effects of the Bush plan, The Congressional Joint Committee on Taxation estimates that the number of United States Citizens affected by the tax will rise from 1 million in 1999 to 14.7 million in 2010. Taking into account the effects of the Bush plan, the number would increase from 1 million in 1999 to approximately 27 million in 2010.
Turning to Congress, the House of Representatives and Senate have both put forth varying proposals that can be characterized as anything from radical changes to the income tax code to minor tinkering. The Simplified USA Tax Act of 2001 (H.R. 86) repeals the present income tax system in favor of a new system, while The Economic Growth and Tax Freedom Act (H.R. 445) simply changes the current marginal tax rates.
H.R. 330, The Family Heritage Preservation Act, introduced January 31, 2001 completely eliminates the Federal estate and gift taxes and the tax on generation-skipping transfers, while S. 84, The Farmer and Entrepreneur Estate Tax Relief Act of 2001 simply increases the current amount subject to a credit that eliminates transfer taxes from $700,000 to $5 million.
About the only major tax that seems to be treated as an all or nothing issue in the current Congress is the Alternative Minimum Tax. Several bills presently before the House and the Senate seek to completely repeal this tax.
The reductions in tax provided by the various proposals range anywhere from $700 billion to over $1.6 trillion. This is quite a wide disparity and reflects the difference in tax, spending and social priorities between various House and Senate members.
Other interesting income tax proposals presently before Congress include:
We stated at the outset of this article our intention was not to offer any opinion on the current proposals now before Congress on the income taxation issues of our day. Our intention was to provide you a flavor of what is currently before Congress regarding issues affecting your daily life.
Our hope is that you will take this opportunity to consider the above proposals, and perhaps go to the U.S. Congressâs web site to review the proposals more closely. Then, based on what you read, and your own values, we hope you will make a decision on what you feel is best and let your elected representatives know how best to represent you.
The simple fact is that there are too many bills coming before Congress and too little time for your representatives to fully comprehend the impact of the proposed changes. This is not a criticism, but the plain truth as expressed by members of Congress and it means we must find out what is happening in Washington D.C. and let our representatives know what we want. That is, after all, what they are there for.
Until next month, may your income be up and may your taxes be down (legally).
While our elected representatives will decide the ultimate shape of our tax system, the bottom line is that it is we, as U.S. citizens, have the right and duty to let our representatives know what we think about the proposals currently before Congress. With that in mind, we thought we might give you a flavor of the various proposals floating around Washington that affect your taxes and we promise to be non-partisan.
Since he is the top elected official in the country, we will start with President Bushâs proposal. As you may have heard, the Presidentâs proposal would reduce income and estate taxes by approximately $1.6 trillion. The major provisions are:
- Replacing the current tax rates of 15, 28, 31, 36 and 39.6 percent with rates of 10, 15, 25 and 33 percent when the rate reductions are fully phased in.
- The child tax credit would be doubled from $500 to $1,000 and the credit would apply to regular and Alternative Minimum Taxes.
- Reducing the marriage penalty by allowing a 10 percent deduction from income for two earner couples (up to a maximum of $3,000).
- Expanding the charitable deduction so non-itemizers could benefit from charitable contributions.
- Making the Research and Experimentation tax credit permanent.
- Eliminating the Estate and Gift taxes.
This article is not intended to be an exhaustive analysis of any tax plan, but we would be remiss if we didnât point out one major area the Bush plan does not address â The Alternative Minimum Tax (âAMTâ). This is, in essence, a tax that is computed as if certain itemized deductions are reduced or eliminated and adjusts certain âpreferentialâ tax deductions.
Unlike the provisions of the income tax code, the various exemption amounts in the AMT are not adjusted for inflation. Thus, even before accounting for the effects of the Bush plan, The Congressional Joint Committee on Taxation estimates that the number of United States Citizens affected by the tax will rise from 1 million in 1999 to 14.7 million in 2010. Taking into account the effects of the Bush plan, the number would increase from 1 million in 1999 to approximately 27 million in 2010.
Turning to Congress, the House of Representatives and Senate have both put forth varying proposals that can be characterized as anything from radical changes to the income tax code to minor tinkering. The Simplified USA Tax Act of 2001 (H.R. 86) repeals the present income tax system in favor of a new system, while The Economic Growth and Tax Freedom Act (H.R. 445) simply changes the current marginal tax rates.
H.R. 330, The Family Heritage Preservation Act, introduced January 31, 2001 completely eliminates the Federal estate and gift taxes and the tax on generation-skipping transfers, while S. 84, The Farmer and Entrepreneur Estate Tax Relief Act of 2001 simply increases the current amount subject to a credit that eliminates transfer taxes from $700,000 to $5 million.
About the only major tax that seems to be treated as an all or nothing issue in the current Congress is the Alternative Minimum Tax. Several bills presently before the House and the Senate seek to completely repeal this tax.
The reductions in tax provided by the various proposals range anywhere from $700 billion to over $1.6 trillion. This is quite a wide disparity and reflects the difference in tax, spending and social priorities between various House and Senate members.
Other interesting income tax proposals presently before Congress include:
- H.R. 56, which provides a tax credit to eligible farmers for the purchase and installation of agricultural water conservation systems.
- H.R. 110, which provides a credit to eligible farmers and ranchers for certain charitable land contributions for conservation purposes.
- Several bills that reduce the tax on Social Security benefits to pre-1993 levels.
- H.R. 151, which provides limited tax credits for political contributions and eliminates the allocation of income taxes to the Presidential Campaign Fund.
- H.R. 167, which would allow for the carryover of up to $3,000 in unused cafeteria plan deferrals to succeeding years. Currently, any funds deposited to Section 125 plans must either be used by the end of the taxpayerâs year or forfeited.
- H.R. 205, which would provide a refundable credit of 2 cents for each pound of recycled hazardous waste.
- H.R. 207, which would prohibit imposing retroactive Federal income tax rate increases.
- H.R. 211, which would provide a tax credit of up to $5,000 to be taken over two years for first time home buyers.
- Several proposals that would provide credits ranging from $1,000 to $3,000 for qualified elementary and secondary educational expenditures. The credits would apply for both public and private educational institutions.
- H.R. 275, which would repeal the phase-out of personal exemptions and reductions in itemized deductions and child tax credits based on gross income.
- H.R. 281, which would allow individuals to designate up to $5 to a newly created breast and prostate cancer research fund.
- H.R. 370, which would allow for a credit equal to a maximum of $3,000 ($1,500 for a married individual filing separately) for contributions to qualified tuition organizations or for qualified instructional and extracurricular activity materials.
- H.R. 394, which provides a credit to employers who support their employeesâ participation in the Armed Forces Reserves. This same bill would provide relief for self-employed individuals.
- H.R. 412, which would exclude from income the gain from the sale of a business closely held by an individual who has attained age 62, subject to certain limitations.
- H.R. 423, which would provide a credit of up to $500 per year for the fair market value of firearms voluntarily turned in to local law enforcement agencies.
- H.R. 507, which would provide a credit of up to $1,500 for the purchase and installation of âsafe storageâ devices for firearms.
- S.8, which, among many other things, would increase the minimum wage to $6.65 per hour by 2003.
- S.203, which would allow for an above-the-line deduction for qualified professional development expenses of elementary and secondary schoolteachers. This same bill would allow a $100 annual credit for teacher purchased classroom materials.
- S.288, which would allow for the imposition of sales taxes by states on internet sales, subject to certain requirements which would ensure uniform application of the taxes.
We stated at the outset of this article our intention was not to offer any opinion on the current proposals now before Congress on the income taxation issues of our day. Our intention was to provide you a flavor of what is currently before Congress regarding issues affecting your daily life.
Our hope is that you will take this opportunity to consider the above proposals, and perhaps go to the U.S. Congressâs web site to review the proposals more closely. Then, based on what you read, and your own values, we hope you will make a decision on what you feel is best and let your elected representatives know how best to represent you.
The simple fact is that there are too many bills coming before Congress and too little time for your representatives to fully comprehend the impact of the proposed changes. This is not a criticism, but the plain truth as expressed by members of Congress and it means we must find out what is happening in Washington D.C. and let our representatives know what we want. That is, after all, what they are there for.
Until next month, may your income be up and may your taxes be down (legally).
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.
Dynamic Content Powered by Service2client.com
SEO Content Powered by DynamicPost.net
