Meet your evolving needs with three integrated business lines in one professional services firm.


Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor.

Tax Watch logo

While some Senate Republicans have expressed support for a one-year extension of all of the Bush-era tax cuts, Senate Democrats are drafting legislation to reinstate the 36 percent and 39.6 percent tax rates for higher income taxpayers after 2012.

Lawmakers Propose Competing Tax Cut Extensions

  • 7/25/2012

Lawmakers Propose Competing Tax Cut Extensions

Senate Democrats are drafting legislation to reinstate the 36 percent and 39.6 percent tax rates for higher income taxpayers after 2012. Their bill may also revive the limitation on itemized deductions and the personal exemption phase-out for higher income individuals after 2012.

Meanwhile, some Senate Republicans expressed support for a one-year extension of all of the Bush-era tax cuts. Many House Republicans, however, want a permanent extension of all the Bush-era tax cuts.

CCH Take Away: The fate of the Bush-era tax cuts appear to be increasingly linked to sequestration under the Budget Control Act of 2011 (BCA). The BCA imposes mandatory, across-the-board spending cuts starting in 2013. Several GOP lawmakers have indicated a willingness to close "tax loopholes" in exchange for avoiding the defense spending cuts in the BCA. The incentives most often mentioned are certain oil and gas tax preferences.

Higher income taxpayers

Before enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the two highest individual income tax rates were 36 percent and 39.6 percent. EGTRRA temporarily reduced those tax rate brackets to 33 percent and 35 percent through 2010. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) extended the 33 percent and 35 percent rates through 2012. EGTRRA also provided for the current 10, 15, 25, and 28 percent rates, which the 2010 Tax Relief Act extended through 2012.

Comment: President Obama has proposed allowing the 33 percent and 35 percent rates to expire after 2012. The 36 percent tax rate would begin at a taxable income level calculated as the appropriate adjusted gross income (AGI) threshold minus the appropriate standard deduction and one personal exemption (two for married couples filing a joint return). The AGI thresholds would be $200,000 for single individuals and $250,000 for married couples filing a joint return ($125,000 for married couples filing separate returns).

Senate Democrats would revive the 36 percent and 39.6 percent rates after 2012. The lower rates, including the 10 percent rate, would be extended through 2013. Unlike the president’s proposal, Senate Democrats would reinstate the limitation on itemized deductions and the personal exemption phase-out for individuals with incomes above $200,000 and married taxpayers filing a joint return with incomes above $250,000.

House and Senate Republicans agree that all of the current individual tax rates, including the 33 percent and 35 percent rates, should be extended. Senate Republicans have proposed extending all of the current rates through 2013. House Republicans may push for a permanent extension of all of the current rates.

Child tax credit/AOTC

Under current law, the $1,000 child tax credit is scheduled to expire after 2012. Senate Democrats would extend the $1,000 child tax credit through 2013. The 2010 Tax Relief Act extended the American Opportunity Tax Credit (AOTC) (the enhanced HOPE education credit) through 2012. Senate Democrats would extend the AOTC through 2013.

Alternative minimum tax

The 2010 Tax Relief Act "patched" the alternative minimum tax (AMT) for 2009 and 2010 by providing for higher exemption amounts and use of all nonrefundable personal tax credits against an individual’s AMT liability. Senate Democrats would provide a "patch" for 2012.

©2012 CCH. All Rights Reserved.