A day of intense negotiating among House Republican lawmakers on January 1 led to the late-evening passage of the American Taxpayer Relief Act of 2012 (HR 8 ) by a vote of 257 to 167. Disgruntled Republicans, including House Majority Leader Eric Cantor, R-Va., had sought to amend the $3.9-trillion tax-cut measure to include a package of spending cuts. However, GOP lawmakers abandoned that plan when it became evident they lacked enough support from members of their own party. The GOP amendment would likely have killed the bill, which President Barack Obama has promised to sign.
Senate lawmakers passed HR 8 by a vote of 89 to 8 in the early morning hours of January 1, following a last-minute agreement reached between Senate Minority Leader Mitch McConnell, R-Ky., and Vice President Biden. The Joint Committee on Taxation estimated that the legislation would lower federal revenues by $3.9 trillion over the next 10 years. The legislation would avert the dire consequences from the so-called fiscal cliff of expiring Bush-era tax cuts and the imposition of spending cuts enacted by the Budget Control Act of 2011 (P.L. 112-25 ). Although Congress missed the January 1 deadline for action, lawmakers were determined to act before the U.S. stock markets opened following the New Year’s Day holiday.
HR 8 would extend the Bush-era tax cuts for individuals earning under $400,000 annually and $450,000 for couples, set the estate tax rate at 40 percent, with an exemption for estates valued under $5 million, provide a permanent patch for the alternative minimum tax (AMT), and tax dividends and capital gains at 20 percent for individuals earning over $400,000 and couples with an income over $450,000.
In addition, the plan would extend through 2013 business tax breaks, including the research and experimentation credit and the production tax credit, and extend personal tax credits including the child care, college tuition and the Earned Income Tax Credit for five years. The legislation also delays the budget sequestration spending cuts for two months and extends long-term unemployment insurance benefits for one year.
Democrats supported passage of the tax legislation, but several predicted that GOP lawmakers would use debate over raising the federal debt limit in February to attempt to pass deeper spending cuts. GOP lawmakers said the lack of spending cuts in HR 8 could send a message to the markets that Washington is not willing to address the deficit, and could lead to a lower credit rating.
As more information comes available on this bill, we will post it.
Please call our office if you have any questions on this at 317 574-4280