Bush tax cuts to get Senate hearing

Finally! Some movement on the myriad tax cuts set to expire at the end of this year.

The Senate Finance Committee is holding a hearing on The Future of Individual Tax Rates: Effects on Economic Growth and Distribution.

In preparation for the hearing, the Joint Committee on Taxation prepared an analysis of the expiring tax provisions. The document also examines the president's fiscal year 2011 budget proposals related to the tax provisions.

The Joint Committee's calculations indicate that continuation of the tax cuts would cost $2.5 trillion from 2010 to 2020.

Scheduled witnesses are:

• Carol Markman, CPA with Feldman, Meinberg & Co. LLP, Syosset, N.Y.  
  
• David Marzahl, president of the Center for Economic Progress, Chicago, Ill.  
  
• Donald Marron, director of the Tax Policy Center, Urban Institute, Washington, D.C.  
  
• Douglas Holtz-Eakin, president of American Action Forum, Washington, D.C.  
  
• Leonard Burman, Daniel Patrick Moynihan Professor of Public Affairs, Maxwell School, University of Syracuse, Syracuse, N.Y.

I am sure the session, set to begin at 10 a.m. Eastern Time today, will be a fun one.

If you can't make it to the Committee's hearing room at 215 Dirksen Senate Office Building on Capitol Hill and don't have access to CSPAN, you can watch it online at the SFC website.

Taking the tax temperature: It will be very interesting to hear what the witnesses, as well as SFC Chair Max Baucus (D-Mont.) and Ranking Member Charles Grassley (R-Iowa), have to say about the expiring tax laws, especially since there's some doubt as to whether Congress can or will do anything about them this year.

Not only is time running out, but election year concerns about deficit spending are making the possibility of putting together a tax package more difficult.

Now about that impending November vote….

Conventional political wisdom has been that the tax breaks affecting
middle-class taxpayers are a sure thing.

Last month, though, House Majority Leader Steny Hoyer (D-Md.) suggested that because of the federal deficit, some expiring popular
middle-class tax breaks might be extended only
temporarily. 

Don't expect today's hearing to solve these thorny tax issues, but at least the topic is getting some public discussion.

Below is a quick look at the expiring tax breaks that affect most individual filers and what could happen on Jan. 1, 2011.

Tax rates brackets would go up. The 10 percent income tax bracket would disappear and wealthier taxpayers would pay more. The new tax rates would be 15 percent, 28 percent, 31 percent, 36 percent and 39.6 percent.

Some couples would pay more. The return of the pre-tax cut brackets and the disparity in the standard deduction for single and joint filers would cause more married couples to again face the marriage penalty.

Investors would pay more. The 15 percent rate for most investors on long-term capital gains and qualified dividends would return to 20 percent. Lower-income investors would again pay taxes on their gains, as the zero percent rate would return to 10 percent.

Student loan interest deduction gets tougher. Inflation adjustments that
allowed more folks to qualify for this above-the-line deduction would
be gone, meaning fewer folks would qualify. Also, the expanded 60-month
period allowed for deductible interest would expire.

Phaseouts return. Higher-income taxpayers would again see their itemized deductions reduced, as well as lose some of their personal exemptions.

Family tax breaks reduced. Enhancements to the adoption tax credit, the employer-provided child care tax credit and the dependent care tax credit also would take hits.

Related posts:

• 2010's expiring tax cuts likely to be dealt with
  by a lameduck Congress
• Homebuyer tax credit extended
• Extenders package fails in Senate again
• Sen. Robert Byrd's tax, budget legacy
• A 'responsible' estate tax
• Today's taxes aren't too bad
• Congressional tax wrap-up

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