In addition to imposing a one-time special tax on oil companies, the Senate panel’s report that was agreed to yesterday makes you wonder what the odds are of ever getting any true 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. reform out of Washington. Highlights of the proposal, courtesy of Yahoo News:
The Senate Finance Committee voted 14-6 to endorse a package that would cut taxes by $60 billion over five years but would omit a GOP priority of preserving reduced tax rates for investment income. Sen. Olympia Snowe (news, bio, voting record) of Maine, a moderate Republican holding a pivotal vote on the committee, rejected the extension.
Without a change, the maximum tax rate on capital gains will increase to 20 percent and dividends will be subject to income tax rates in 2009. Although the Senate’s tax bill would not extend the capital gains and dividend tax breaks, it would extend a host of other soon-to-expire tax breaks. The list includes investment incentives for small businesses, a tuition deduction, a business research and development credit and a deduction for teachers who buy their own classroom supplies.
The tax breaks include roughly $7 billion for individuals and businesses hit by hurricanes, filling in the details of the president’s proposed Gulf Opportunity Zone and increasing education tax breaks for students from the Gulf Coast. Home buyers would get a new tax deductionA tax deduction is a provision that reduces taxable income. A standard deduction is a single deduction at a fixed amount. Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state and local taxes paid, mortgage interest, and charitable contributions. for private mortgage insurance premiums.
The breaks also include a new deduction for taxpayers who donate more than $210 to charity during the year, making it available to everyone whether or not they itemize their deductions. Taxpayers who itemize deductions would lose some of their current advantage and be required to exceed a new $210 floor to get a tax break. (Full story)
Every year we see these tweaks here and there with special provisions that phase-out and phase-in at some specific moment in time. It’s hard to imagine what it might take to get lasting tax reform that promotes broad economic growth, limits uncertainty in decision-making, and makes the tax implications of decisions as neutral as possible.
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