Saturday, May 29, 2010

Tax Effects of the Unemployment Benefits Extension

The House of Representatives, not surprisingly and with a vote more or less along party lines, which would extend added unemployment benefits to chronically unemployed workers to November. There are a number of tax provisions associated with the bill--some helping selected taxpayers while others increase taxes or reduce availability of tax credits.

Bill provisions favoring taxpayers included extension of the R&D credit, school teacher supplies deduction and extension of the option of taking sales taxes in lieu of state income taxes. Other provisions included tax breaks for businesses in low-income areas, near Native American reservations and whose who hire active military reservists. By way of counter, hedge fund managers are potentially subject to higher taxation and certain multinational corporations will find a harder road using the foreign tax credit. Somewhat surprising, it does not appear that the "annual" AMT patch was included. Fox News estimated a net $30 billion addition to the deficit.

This one is pretty much a "taste and preferences" bill; advocates of the unemployed will cheer; tea partiers, not so much. One thing appears to be certain; simplification of the tax code was not a priority of the bill's crafters.

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