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Both parties have unveiled competing small business tax bills and fiscal year (FY) 2013 budget blueprints, framing the debate over tax reform as 2012 unfolds.

2013 Budget Blueprints Revealed

  • 4/4/2012

2013 Budget Blueprints Revealed

Senate Democrats and House Republicans have unveiled competing small business tax bills and fiscal year (FY) 2013 budget blueprints. The small business bills and the budget blueprints frame the debate over tax reform as 2012 unfolds.

CCH Take Away: "The GOP budget claims to finance its tax cuts by scaling back unspecified ‘tax expenditures’ and hints that such restrictions would primarily affect higher-income people," Chuck Marr, director, federal tax policy, Center on Budget and Policy Priorities (CBPP), Washington, D.C., told CCH. "But the (GOP) budget does not contain a single proposal to limit any tax expenditure."

Small business bills

The GOP bill would create a new deduction for domestic business income of qualified small businesses. Generally, small businesses with fewer than 500 full-time equivalent employees, based on either calendar year 2010 or 2011, could claim a 20 percent deduction on qualified domestic business income starting in 2012. The amount of the deduction could not exceed 50 percent of qualified W-2 wages. Special rules would apply to partnerships.

The Democratic bill would extend 100 percent bonus depreciation, which expired after 2011, through 2012. The Democratic bill would also provide a 10 percent income tax credit on new payroll added in 2012. The amount of the credit would be capped at $500,000.

FY 2013 budget

On March 21, 2012, the House Budget Committee approved a GOP-drafted budget blueprint for FY 2013 (H. Rept. 112-421) along party lines. The budget proposes several tax reforms but contains few details.

The GOP FY 2013 budget would:

  • Consolidate the individual income tax brackets into two: 10 percent and 25 percent;
  • Repeal the alternative minimum tax (AMT);
  • Reduce the corporate tax rate to 25 percent;
  • Shift the U.S. from a worldwide system of taxation to a territorial system of taxation; and
  • Eliminate unspecified tax preferences.

The House Budget Committee rejected a number of amendments. The amendments would have extended the American Opportunity Tax Credit (AOTC), eliminate certain oil and gas tax preferences, imposed the so-called "Buffett Rule," and more.

Democrats unveiled their proposed FY 2013 budget blueprint, "Budget for All," on March 26. The Democratic proposal would implement the so-called "Buffett Rule," eliminate oil and gas tax preferences, and allow the Bush-era tax cuts to expire for higher-income individuals after 2012.

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