Republican negotiators in Congress sent tax legislation out of conference committee. The highlights of this generally lackluster legislation:
– AMT Relief extended, with a new higher exclusion of $62,550 for 2006;
– 15% capital gains rate extended for two more years, through 2010;
– Section 179 depreciation at $100,000 extended to 2010, from 2008;
– Roth IRA conversions allowed for everyone. This, as Joe Kristan correctly notes, increases tax revenues today, but drastically impacts tax revenues in a few years. Roth IRAs are not tax deductible today. However, when you retire and starth withdrawing the funds, they are tax-free;
– The Section 199 Production Deduction (the deduction from hell) has been toughened. The deduction will now be limited to 50% of W-2 wages; and
– Mandatory payments for Offers in Compromise (OIC) of 20% of the OIC. This will discourage OICs.
There’s plenty more, but it’s mostly arcane stuff. There’s a lot of budget shenanigans. As Joe Kristan noted, corporate estimated tax payments are definitely being played around with:
“The 2006 estimated tax payment installments due in July, August or September (third quarter, for calendar year taxpayers) will be 105% of the amount otherwise due for the quarter. The same installment in 2012 will be 106.25% of the amount otherwise due; in 2013, the magic number will be 100.75% of the amount otherwise due.
-In 2010, 20.5% of the third quarter installment due September 15 will be payable October 1; in 2011, 27.5% of the third quarter installment is payable in October.
The government has a September 30 fiscal year, and these rules obviously shuffle income among the fiscal years to meet some arcane budget rule, at least on paper and in a laughably phony manner.”
Of course, the whole procedure is that way. Many of the delayed tax increases will never see the light of day. They’re only in the legislation so that it meets the $70 billion tax cut limitation; if the tax cut were larger than that, the bill would be subject to a fillibuster in the Senate. It cannot be fillibustered.
For more information:
Text of the Bill (HR 4297);
Los Angeles Times News Story;
Roth Tax Updates Post;
and TaxProf Roundup on the legislation.