Tax overhaul over and out … for now
Tuesday, December 06, 2005
Hmmm. Six weeks ago the President’s Advisory Panel on Federal Tax Reform formally presented its recommendations on how to overhaul the current tax code. Now it looks the President himself wants to put the Panel’s report on the shelf. In fact, he apparently wants to shove it to the back of the bottom shelf so that it won’t get any attention during the coming mid-term elections.
When this whole process began, the White House had hoped to use comprehensive tax reform as the theme for the coming State of the Union address. Looks like the speechwriters at 1600 Pennsylvania Avenue better get started on a new draft. Word started trickling out yesterday about the administration’s unease with the topic of tax reform. TaxProf has links to several publications reporting the change of heart. Basically, the “official unofficial” word (that is, it came from an insider who didn’t want to be quoted) is that there’s “not enough manpower” at the Treasury Department to put together a realistic, workable tax overhaul plan that could be specifically cited at next month’s speech to Capitol Hill and the nation.
The “unofficial unofficial” word (that is, the insider said ‘OK, here’s the scoop but you sure didn’t hear it from me because there’s no way in hell I’m becoming Scooter’s bunkie’) is that Bush and company, who watched their effort to restructure Social Security bite the dust, didn’t want to hear same song, second verse of voters bemoaning lost benefits, especially on the heels of questions about government ethics, hurricane response and recovery efforts and the Iraq war.
Since we’re not going to get to watch the complete tax code get revamped, the next best thing is watching whether Congress will continue some existing tax breaks. Basically, lawmakers must agree to extend these measures that originated in earlier tax bills but, in order to make the budget numbers work at the time they were passed, were phased in and/or granted only a limited existence. Now, budget concerns could doom them completely. The Washington Post reports that Bush, who previously watched his tax cuts sail through Congress, is putting on a full-court press to get his favorite ones extended.
Several, such as existing low rates for capital gains and dividends (an Administration biggie) and continuation of the child tax credit at its current $1,000 level, are alive beyond 2005 regardless of what happens in Congress this month. But extension of the measures was included in either the current Senate or House (or both) tax bills in hopes of forestalling future last-minute battles over the tax breaks’ existence.
2005, however, could be the last year for three popular tax breaks: the state and local sales deduction, the deduction for college tuition and fees and the educators’ classroom expenses deduction. If any of these will help you cut your coming tax bill, be sure you don’t waste them. This Bankrate article offers some tips on the steps you need to take by Dec. 31 to make sure you can claim these deductions on your 2005 return.
These three breaks have general Congressional support and are popular with taxpayers. Couple that with coming elections in which politicians like to tout all the fine tax breaks they’ve given the people, and it wouldn’t be a big surprise to see them remain on the tax books. But you never know what Congress might do, so to be tax safe if you can claim them, make sure you do it this year.
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