Bills in Brief

While plans for any large scale tax overhaul are on hold until 2008, Congress continues to tweak, extend and slice taxes on an ongoing basis.

in 2006

In 2006, Congress managed to extend a couple of Bush tax cuts in 2006 - including capital gains and dividends cuts and relief from the Alternative Minimum Tax (AMT).

At the tail end of the year, Congress also squeezed through some last minute tax credit extensions, including; research and development credits for business, college tuition deductions, state sales tax deductions (for those in states with no income tax), and incentives to hire welfare recipients and to conserve energy. (WP)

Efforts to pull off a permanent cut to the estate tax went no where in 2006.

in 2007

Congress will again try to keep AMT at bay in 2007 at the same time as twittering around with minor tax breaks and tweaks.

Alternative Minimum Tax: Originally created to keep the super-rich from deducting the heck out of their tax returns, the AMT set up a second way of calculating taxes and told the wealthy to pay whichever amount was higher. The problem is that more and more middle class Americans qualify as "rich" since the AMT brackets don't rise with inflation. Congress has passed short term exemptions from the AMT over the past few years, and the Dems seem set to continue the trend this year. But doing so is expensive - about $50b a year. New pay-go rules make things even tougher - without an out from a super-majority, Congress would have to make up for that $50 billion somewhere else in the budget.

It's looking like Congress will pass on pay/go - and instead ditch the AMT for a year without accounting for the cost. The House passed a bill paying for the AMT patch by tweaking the tax code on executives' deferred income, international corporations and private investment groups. The Senate, however, doesn't have the votes to raise any taxes, so will likely go for putting the $50b on the federal debt tab. (WP) (For more on the AMT, see TPC, a joint venture of Brookings and Urban to get the full wonked out picture - or just look at this NYT's graphic.)

Other tax cut extenders: Along with the AMT exemption, Congress will also likely pass short term extensions to popular tax cuts - including research and development tax incentives and state tax deductions. Unlike with the AMT, Congress may cover the cost of those tax extensions ($45b over two years) by raising taxes on Wall Streeters.

Energy: As part of its 100 hour agenda, the House took back tax perks for the oil industry. The Senate may follow suit.

Restauranteurs: Attached to a minimum wage bill - to dull the blow of higher wages on the food industry - businesses with low wage workers got a few tax breaks from Congress this year.

Streamlined corporate tax? The president says he'll be sending Congress a package to lower the corporate tax rate - to bring it more in line with other wealthy nations - while dropping targeted corporate
tax breaks, but it's hard to imagine this Congress working with the president on tax reform. (WP)

Taxing investment funds: Congress may vote to raise the tax on the income managers make on hedge funds, private equity and venture capital. (WP)

in 2008

In October '07, the House announced ambitious plans to overhaul the tax code. Its chances of getting anywhere under a Bush presidency seem slim, but for what it's worth, we list some of the key provisions:

• $870 billion in tax cuts (over ten years, we're guessing) by axing the Alternative Minimum Tax and upping the standard deduction and earned income credit,
• cutting corporate income taxes down to 30.5% from 35%, and
• adding on 4% in taxes to families topping $200,000 in income.

See our tax page for an explanation of what exactly all those cuts are about.

Updated December 5, 2007

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