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National News

January 1, 2013

Tentative tax deal would make everyone pay more

(Continued)

For individuals making up to $200,000 and families making up to $250,000, the rest of their taxes would remain the same, as the Bush-era tax cuts were made permanent for them.

The wealthy would get less generous tax breaks.

For single filers with taxable income above $250,000 and couples with income over $300,000, the tax credits and deductions enjoyed by most taxpayers would be phased out starting at those thresholds. The deal would limit the number of personal tax exemptions they can claim when filing income-tax returns, and limit the value of the itemized tax deductions they take.

Individuals with taxable income above $400,000 and families with income over $450,000 would pay a top tax rate of 39.6 percent, up from 35 percent. They would also pay 20 percent on capital gains and dividends, up from 15 percent. It could have been worse for such taxpayers: Taxes on dividends were poised to revert to the rate of taxpayer’s ordinary income, as it was in the pre-Bush years.

In another compromise, lawmakers agreed to a raise the inheritance tax, sometimes called the estate tax, from 35 percent to 40 percent on inheritances above $5 million. This is an issue of great interest in farm states, where many properties are left to children. Although the compromise reflects an increase, it is below the 45 percent rate sought by President Barack Obama on inheritances valued above $3.5 million.

More than 4.8 million U.S. workers in December were counted as unemployed for six months or longer, roughly 40 percent of all unemployed. Lawmakers Monday tentatively agreed to extend unemployment insurance benefits. The last 2012 checks were sent out on Dec. 29, and the long-term unemployed had faced the prospect of a very grim start to 2013.

For older Americans, it was what’s not in the deal that mattered. House Speaker John Boehner, R-Ohio, had pushed for a less generous measure of how Social Security benefits are adjusted annually, to cut $200 billion in spending over 10 years. That was left out of the deal, after opposition from AARP, the powerful lobby for seniors.

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