UPDATE: Here are details of Senate bill averting 'fiscal cliff' -- including the sales-tax deduction
The Associated Press
By The Associated Press
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Sales tax deduction kept in 'fiscal cliff' agreementU.S. Sen. Maria Cantwell announced today that the income tax deduction for Washington state and local sales taxes is part of the "fiscal cliff" agreement reached at the 11th-hour of 2012.
Here is a statement from her office:
The bill, which passed the Senate early Tuesday morning by an 89-8 margin, will prevent income tax increases for middle-class families. It now heads to the U.S. House for consideration.
Senator Cantwell announced Tuesday that the bill would extend the state sales tax deduction for two years, covering calendar years 2012 and 2013. Without an extension, Washington residents would no longer be able to claim the deduction when they file taxes this April.
For 2009, the most recent year of published IRS data, nearly 850,000 Washingtonians took advantage of the state and local sales tax deduction for an average tax savings of nearly $500 per filer.
Tuesday's agreement would also extend other key tax credits that Cantwell has championed, including the Returning Heroes and Wounded Warriors Work Opportunity Tax Credit, the New Markets Tax Credit, the Low-Income Housing Tax Credit, the Research and Development Tax Credit, and tax credits for clean energy production.
“This bill protects middle-class families from income taxes going up, and provides certainty for Washington state taxpayers and businesses by extending the state sales tax deduction for two years,” Cantwell said.
“Extending the state sales tax deduction puts an average of $500 back in the pockets of 850,000 Washington tax filers. This bill also extends crucial tax credits for hiring returning veterans, building affordable housing and producing clean energy.
“While I remain disappointed by the gridlock in Washington D.C., this bipartisan agreement is a step in the right direction to maintain predictability for businesses and middle-class families.
"Moving forward, both parties need to work together to avoid the arbitrary cuts of sequestration and to provide greater certainty for our economy.”
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Here are highlights of a bill approved Tuesday by the Senate aimed at averting wide tax increases and budget cuts scheduled to take effect in the new year.
The measure would raise taxes by about $600 billion over 10 years compared with tax policies that were due to expire at midnight Monday.
It would also delay for two months across-the-board cuts to the budgets of the Pentagon and numerous domestic agencies.
The next step: The House is expected to vote on the bill today or Wednesday.
—Income tax rates: Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6 percent, up from the current 35 percent. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.
—Estate tax: Estates would be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent.
—Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15 percent to 20 percent.
—Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.
—Other tax changes: Extends for five years Obama-sought expansions of the child tax credit, the earned income tax credit, and an up-to-$2,500 tax credit for college tuition. Also extends for one year accelerated "bonus" depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.
—Unemployment benefits: Extends jobless benefits for the long-term unemployed for one year.
—Cuts in Medicare reimbursements to doctors: Blocks a 27 percent cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula.
—Social Security payroll tax cut: Allows a 2-percentage-point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2 percent.
—Across-the-board cuts: Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. Cost of $24 billion is divided between spending cuts and new revenues from rule changes on converting traditional individual retirement accounts into Roth IRAs.
Last modified: January 01. 2013 10:57AM