The mid-term election day draws ever closer. That means members of Congress are frantically trying to come up with something they can take back to their constituents before it's too late.
Since the $100 per taxpayer
bribe rebate check idea fell flat,
lawmakers are turning their attention toward other, long-delayed tax
proposals. It appears that House and Senate negotiators have finally agreed upon a $70 billion
tax reconciliation bill.
The measure, according to tax-watchers at CCH, includes a two-year extension of capital gains and dividends tax rate cuts and a one-year patch for the pesky alternative minimum tax (AMT).
In order to pass, lawmakers must come up with ways to offset the money that the tax cuts would cost the already deficit-ridden federal bottom line. Most of that robbing Peter to pay Paul would come, again according to CCH, from raising the income cap on conversions of traditional IRAs to Roth accounts.
Currently, you can only do this if you (single or married filing jointly) have an adjusted gross income of $100,000 or less. If enough higher-income taxpayers opt to switch from their tax-deferred IRAs to tax-free-upon-distribution Roth accounts (you can read about this process and tax benefit for Uncle Sam here), the Treasury could collect the required taxes now.
A hitch in the reconciliation package's finalization, however, is a disagreement on how to proceed with a second tax package AKA the "trailer" bill. CCH and its fellow tax publisher Tax Analysts report that this companion bill includes, among other things, an extension of the state and local sales tax deduction and popular business tax cuts such as the research credit.
The major problem here is how long to extend these breaks and just how to get them passed. One possibility being floated is to roll them into the pension reform bill also being debated.
In addition, CCH says that Senate Finance Committee Chairman Charles Grassley, R-Iowa, "is making a last-ditch effort to include in the second bill several provisions from the Senate-passed package of charitable giving incentives and reforms, including a nonitemizer/itemizer deduction, tax-free distributions from IRAs for charitable purposes, a charitable deduction for contributions of food and book inventory, a basis adjustment to stock of S corporations contributing property, penalties for involvement by exempt organizations in tax-shelter transactions, an excise tax on certain life insurance contracts, and a deduction for charitable contributions of facade easements."
During all this, the players are positioning themselves for what they hope is positive public consumption of this legislative recipe. My favorite partisan political characterization so far comes (via this story in the Washington Post) from Scott "See Ya!" McClellan, wildly spinning his way out the White House staff door:
"The tax relief that the president advocated and passed is working to do exactly what it was intended to do: get the economy growing and help create jobs. To keep our economy strong and growing, the tax relief needs to be made permanent. Particularly at a time when Americans are paying more at the pump, the president believes the last thing they need is for Washington to take more of their hard-earned dollars out of their pockets."
OK, let me get this right. Congress and the president can't come up with anything acceptable, either politically or legislatively, to address rising gasoline prices. So we'll say our favorite tax cuts really are ways to help motorists cope?
Hhmmm, sort of like throwing a handful of spices into the turkey sausage mix to make it more palatable.
And all these Washington, D.C., maneuvers really make you realize just what a Congressional expert old Otto was.
Savory sausage sayings: Every nation and every region has its characteristic sausages, using meats and other ingredients native to the region and employed in traditional dishes. -- Wikipedia
Litigation: A machine which you go into as a pig and come out of as a sausage. -- journalist Ambrose Bierce
When I get to Texas, I generally go and get some good brisket. And I'll get a selection of cabrito and lamb and some hot sausage. And a big slice of onion. And I'll sit down and have a good beer. Shiner. -- actor Rip Torn
"People who enjoy eating sausage and obeying the law should not watch either being made" -- Germany's "Iron Chancellor" Otto von Bismarck