Part of it, anyway. Today marks the two year anniversary of the passage of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, where the Bush-era taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. cuts, originally set to expire two years ago, were extended until the end of this year. This extension is part of a trend of temporary tax provisions – temporary tax cuts, temporary payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. holidays, temporary AMT patches – all of which signify Congress's willingness to cut taxes without admitting to the true budget cost of such policies or enacting corresponding spending reductions.
Given that the compromise two years ago was widely viewed as a down-to-the-wire finish, it's particularly worrying that there are still no signs of a deal this year. If there's no deal, tax rates will go up for everyone next year when the Bush tax cuts expire, and people will see their paychecks immediately shrink when the payroll tax holiday expires and federal income tax withholdingWithholding is the income an employer takes out of an employee’s paycheck and remits to the federal, state, and/or local government. It is calculated based on the amount of income earned, the taxpayer’s filing status, the number of allowances claimed, and any additional amount of the employee requests. increases. Then, next April, millions of families will get hit with a large and unexpected tax hike – because the AMT hasn't been patched for this year. Finally, the top estate taxAn estate tax is imposed on the net value of an individual’s taxable estate, after any exclusions or credits, at the time of death. The tax is paid by the estate itself before assets are distributed to heirs. rate will rise to 55%, and the estate tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the IRS, preventing them from having to pay income tax. will shrink from over $5 million back down to $1 million.
Two years ago, Congress finished with only 14 days to spare; this year we're 14 days out and can't see the finish line.Share