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William Perez

Comparison of House and Senate Tax Bills

By August 4, 2012

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Both the House of Representatives and the Senate have each separately passed tax bills relating to the years 2012 and 2013.

The House bill (H.R. 8), passed on August 1, 2012, would extend for one additional year (through 2013) the current tax rate structure (also known as the Bush tax cuts). The House bill also calls for a two-year patch for the alternative minimum tax (for 2012 and 2013). The House bill was backed mostly by Republican legislators, "The 256-1717 vote ... was largely partisan with only one Republican, Rep. Timothy Johnson (R-IL), voting in opposition. Nineteen Democrats voted in support of the plan," reports Kelly Phillips Erb (Forbes). Over a ten-year period, the House bill would collect an estimated $205.084 billion less than if the Bush-era tax cuts were allowed to expire as scheduled.

The Senate bill (S. 3412), passed on July 25, 2012, would extend current tax rates for lower- and middle-income persons, would increase tax rates on higher-income persons, would extend for one year (through 2013) certain tax provisions that expire at the end of 2012, and would patch the alternative minimum tax for one year only (2012). The Senate bill was favored mostly by Democratic legislators. The threshold at which personal tax rates would increase would be set as follows: "married couples with taxable income under $250,000 less the standard deduction and two personal exemptions; single taxpayers with taxable income under $200,000 less the standard deduction and one exemption; and heads of household with taxable income under $225,000 less the standard deduction and one exemption; the thresholds would be indexed for inflation after 2009," according to a summary by the Tax Policy Center. Individuals with incomes above these threshold levels, would have some of their itemized deductions and personal exemptions limited by phase-outs, would have a 20% rate on dividends and long-term gains, and would face tax rates of 33%, 36% and 39.6%. Over a ten year period, the Senate bill would collect an estimated $249.663 billion less than if the Bush-era tax cuts were allowed to expire as scheduled.

Many commentators believe the votes are mostly for political show. Ms. Erb explains it thus: "If you think back to your junior high civics class, you'd recall that what's supposed to happen now is that the Senate and the House would negotiate (via committee) and come to some sort of compromise on the measure. In an election year, that's not going to happen. What's really going to happen is that - at least until November - the Democrats are going to oppose any plan that holds rates steady for the top 2% of taxpayers (those making $250,000 or more) and the Republicans will oppose any plan that doesn't extend the cuts for all taxpayers."

Even if these two particular bills do not move forward, I find the two bills sufficiently interesting in their details. In fact, looking at the two bills side-by-side, there are notable similarities. I believe that particular details may re-emerge in a future tax package. So I offer for your consumption, the following side-by-side comparison of the two bills under consideration in Congress.

Comparison of House and Senate Tax Bills
H.R. 8 S. 3412
Family And Business Tax Cut Certainty Act Of 2012 (also known as the Job Protection and Recession Prevention Act of 2012) Middle Class Tax Cut Act
Roll call 256 in favor, 171 against 51 in favor, 48 against
Status Passed in House Passed in Senate
Tax Rate Provisions
Tax rates on ordinary income Extends current tax rates through 2013 Extends current tax rates through 2013 for taxpayers earning less than certain threshold amounts; Increases tax rates for persons above the threshold.
Tax rate on qualified dividends and long-term gains Extends 15% rate through 2013 Extends 15% rate through 2013 for taxpayers earning less than the threshold amounts. 20% rate for persons earning above the threshold.
Threshold for higher tax rates Threshold is set at $200,000 for singles, $225,000 for head of household and $250,000 for joint filers.
Alternative Minimum Tax Patch for 2012 and 2013, offset by credits. Exemption amount is $78,750 (married) and $50,600 (unmarried) for 2012. For 2013, exemption amount is set at $79,850 (married) and $51,150 (unmarried). Patch for 2012, offset by credits. Exemption amount is $78,750 (married) and $50,600 (unmarried).
Expiring provisions
Limitation on itemized deductions Extended through 2013 Reinstated for personal incomes above the threshold
Limitation on personal exemptions Extended through 2013 Reinstated for personal incomes above the threshold
American Opportunity Credit Extended through 2013
Child Tax Credit at $1,000 Extended through 2013
Earned Income Credit for 3 or more dependents Extended through 2013
Section 179 Deduction For 2013, deduct up to $100,00 of equipment, $400,000 phase-out threshold For 2013, deduct up to $250,00 of equipment, $800,000 phase-out threshold
Estimated Revenue Impact over 10 years -$205.084 billion -$249.663 billion

More about the Senate's Middle Class Tax Cut Act:

More about the House's Family And Business Tax Cut Certainty Act:

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