Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

WHITHER 2005 TAX LEGISLATION?

November 14, 2005

Congress is trying to put together a "tax reconciliation" bill for 2005. This bill is important to Congressional taxwriters because it is the only tax bill that won't need 60 votes to pass the Senate. Considering that so far it can't get 11 votes to pass the Senate Finance Committee, they have their work cut out for them.

The bill has one "must pass" provision - one that would keep AMT from applying to millions more taxpayers in 2006. It also is needed to extend other popular tax breaks, including the research credit and the above-the-line deduction for teacher classroom expenses.

The biggest controversy arises over the desire to use the bill to extend the 15% top capital gain and dividend rate. That reduced rate is set to expire after 2008, at which point it would rise to 20%. Senate Finance Committee Chairman Grassley has been unable to convince Maine Republican Olympia Snowe to go along with extending the reduced rate, and he can't reach 11 votes without her help.

Meanwhile, the House Ways and Means Committee is drafting its own bill. Chairman Bill Thomas wouldn't bother to provide AMT relief. Per Tax Analysts:

Thomas had suggested that exclusion of any AMT relief might work to spur tax reform efforts in 2006, as more families would become ensnared by the tax. The need for a permanent solution to the AMT's growing reach is often regarded as an incentive to reform the tax code, and AMT repeal is the centerpiece of the tax reform plan presented November 1 by the President's Advisory Panel on Federal Tax Reform.

That's a bit like spurring debate on fire-sprinkler laws by committing arson.

One thing is for sure: estate tax reform is dead for this year, and possibly for this Congress.

Links:

Tax Analysts free coverage

Washington Post coverage

      Bookmark: del.icio.us • Digg • reddit