Your taxes and the new Capitol Hill

So what does the political power shift in Washington, D.C. mean to you and me and our future tax returns?

First, Congress and its old cast of characters have some outstanding issues to wrap up, starting with the expired tax breaks.

Dubya talked about bipartisanship on Nov. 8, but yesterday he met with his party's Senate and House leaders to discuss ways to push through legislation that won't have a chance in January when the Democratic Congress is sworn in. High on that agenda is the estate tax.

Will Frist et al again try to force repeal through by tying it to the other more popular tax breaks? I hope not, but since it's the last chance the GOP will get to go for full repeal for at least a couple of years, I wouldn't be surprised.

Given Congress' antics, I'm stunned that C-SPAN doesn't get better ratings. Capitol Hill is the ultimate reality show and one that actually matters to our lives.

Then you add the absurd comedy, plenty of tragedy and the unpredictability factor. You never know when some government official will profanely tell a colleague what to do and where to go to do it.

Same place, next year: The next question is just what will happen on the tax front when the 110th Congress convenes? Will we get the massive, across-the-board tax increases that rapid Republicans used as a campaign cudgel to try to scare sway voters? I doubt it.

We're more likely to see targeted tax legislation that, yes, will cause higher IRS bills for some, specifically the wealthy who've had a freer tax ride for the last six years.

Of course, the chances that the president will actually sign such measures into law are remote zero. Yes, Dubya will finally get a second (and third and ...) veto in the books. So realistically, we're simply going to face tax stagnation (as MauledAgain describes it) for the next couple of years.

That will eventually change, though. When tax legislation does start to move, the driver, notes William Perez at About Taxes, will be 2010.

Nope, that's not a new tax form. It's the year that most of the tax breaks we've been enjoying since 2001 will expire. The deadline, referred to as a sunset date, was inserted in order to meet revenue/expenditure rules.

Essentially, it's Congressional book juggling, robbing Peter to pay Paul if you will, so we can enjoy the tax relief now and worry about paying for it -- or more accurately, let someone else worry about paying for it -- down the road.

While Congress this year did remove the sunset provision from some tax breaks, many more tax laws will disappear unless lawmakers take additional steps.

TaxProf links has a link roundup to stories on the new-look House and just what those tax steps might be. One of the items notes that incoming Ways and Means Chair Charles Rangel wants to tackle the alternative minimum tax.

If the parallel tax isn't altered, 45 million households will find that the AMT will force them to pay around $1.35 trillion in additional taxes over the next decade.

Committee musical chairs: On a personal note, I'm looking forward to Rangel's tenure atop the tax-writing committee. He was there when I worked in Washington, D.C., as a staffer with another Congressman who served on the Committee and then for the Committee itself. Rangel never pulled punches and sometimes single-handedly kept hearings interesting.

According to the New York Times' political blog The Caucus, Charlie's already back in fighting form.

The newspaper also has a nice feature on the expected new committee chairs in the Democratic Senate (full story here; direct link to the chairman/woman chart here).

The Senate Finance Committee transition from Charles Grassley to Max Baucus should be pretty seamless. Baucus supported the GOP 2001 tax cuts, although he's been a recent critic of the party's machinations that delayed revival of the expired ones.

But the Senate committee I'm most pleased to see change hands is Commerce, Science and Transportation, which next year will have Daniel Inouye as chair.

The Hawaiian Senator is a full and refreshing 180 degrees from the current chair, Ted Stevens of Alaska.

Ah yes, the poster boy for irascibility. Mr. Bridge to Nowhere. The Internet Tubes king.

Goodbye, Ted, and good riddance!

Comments

[Dimes]

So what can we, as taxpayers, do now to capitalize on favorable tax rates compared to what they'll (presumedly) be in 2010?