House, Senate sit on tax bills the other passed

By Stephen Ohlemacher

Associated Press

Published: Saturday, Dec. 1 2012 8:20 p.m. MST

President Barack Obama waves after speaking at the Rodon Group, which manufactures over 95% of the parts for K'NEX Brands toys, Friday, Nov. 30, 2012, in Hatfield, Pa. The visit comes as the White House continues a week of public outreach efforts, while also attempting to negotiate a deal with congressional leaders. (AP Photo/Susan Walsh)

Associated Press

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WASHINGTON — It may not sound like it from the rhetoric, but both the House and Senate already have passed separate bills to delay big tax increases awaiting nearly every taxpayer next year if Congress and the White House can't agree on a plan to avert the "fiscal cliff."

The Democratic-controlled Senate passed a bill in July that would extend many of the expiring George W. Bush-era tax cuts for middle-income families, while letting taxes go up for individuals who make more than $200,000 and married couples making more than $250,000.

The Republican-led House passed a bill in August that would extend the tax cuts for just about everyone.

Republican leaders in Congress say they are willing to accept higher taxes on the wealthy, but only by reducing or eliminating credits, deductions and exemptions. They adamantly oppose higher tax rates, which Democratic leaders are demanding.

Leaders from each party said their bill should be the starting point for finding a solution in the next few weeks. Both bills would extend tax cuts through next year. The Senate bill would save taxpayers about $250 billion, according to congressional estimates. The House bill would save taxpayers about $400 billion.

A look at the specifics of each bill:

Tax rates

Senate: Extends the Bush tax cuts for middle-and low-income families, while letting the top two income tax rates increase from 33 percent to 36 percent and from 35 percent to 39.6 percent. The 33 percent rate would be applied to income above $200,000 for individuals and $250,000 for married couples filing jointly. The top tax rate is applied to incomes above about $390,000.

House: Extends all the Bush tax rates through 2013, for wealthy, middle-income and low-income families.

Payroll tax

Neither bill addressed the payroll tax cut, which reduced the Social Security payroll tax paid by workers from 6.2 percent to 4.2 percent in 2011 and 2012. If the tax cut expires, a typical worker making $50,000 in wages would get a $1,000 tax increase next year.

Child tax credit

Both bills extend the $1,000-per-child tax credit through 2013. If Congress does not act, the tax credit is scheduled to revert to $500 per child next year.

Senate: Extends a 2009 provision that makes the child tax credit available to more families that don't make enough money to owe federal income taxes.

Earned income tax credit:

Both bills extend a more generous credit first enacted under Bush. The EITC provides tax credits to low-income families based on their income and number of children. The credits are available as payments to many families that don't make enough money to owe federal income taxes.

Senate: Extends a 2009 provision that makes the credit more generous for families with three or more children.

Education tax breaks

Both bills extend more generous tax deductions for interest on student loans and exemptions for employer-provided educational assistance.

Senate: Extends a tax credit of up to $2,500 a year for college costs, first enacted in 2009.

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