Congress Makes End of Year Tax Decisions: Smart Money Predicts the Results
It's the standard (regrettably) end-of-year panic by Congress to reconsider tax breaks which are set to expire. Keep in mind in considering the likely outcome of these breaks that the Supercommittee on the deficit looms and the Democrats want "revenue enhancements" to be included in the final package.
The editors of Smart Money ranked the likelihood of extension for several popular tax breaks. They gave highest likelihood to (yet ANOTHER annual) alternate minimum tax patch; a strong likelihood to the tuition and K-12 teacher supplies deductions and the state/local income or sales tax deduction option; a more likely than not rating to extending the reduced Social Security withholding rate and IRA charitable deduction provisions and a low likelihood of maintaining the energy-efficient home improvement credit.
For the most part, I tend to agree with Smart Money--although based on the deficit issue mentioned above I am less confident than the authors that the income/sales decision option, the charitable IRA deduction and the reduced Social Security rate of 4.2% for employees will be continued (one possible compromise on the Social Security--the 4.2% rate would only be used for the first $50,000 of wages or salary per job). One takeaway--if you have home repairs such as weatherstripping or better insulated windows to install; arrange to have this done before Christmas. The more salient concern here--why can't Congress (both Harry Reid and John Boehner) get this done earlier in the year so taxpayers have some time to make decisions.
The editors of Smart Money ranked the likelihood of extension for several popular tax breaks. They gave highest likelihood to (yet ANOTHER annual) alternate minimum tax patch; a strong likelihood to the tuition and K-12 teacher supplies deductions and the state/local income or sales tax deduction option; a more likely than not rating to extending the reduced Social Security withholding rate and IRA charitable deduction provisions and a low likelihood of maintaining the energy-efficient home improvement credit.
For the most part, I tend to agree with Smart Money--although based on the deficit issue mentioned above I am less confident than the authors that the income/sales decision option, the charitable IRA deduction and the reduced Social Security rate of 4.2% for employees will be continued (one possible compromise on the Social Security--the 4.2% rate would only be used for the first $50,000 of wages or salary per job). One takeaway--if you have home repairs such as weatherstripping or better insulated windows to install; arrange to have this done before Christmas. The more salient concern here--why can't Congress (both Harry Reid and John Boehner) get this done earlier in the year so taxpayers have some time to make decisions.
posted by Dan Meyer at 9:44 AM
1 Comments:
Dan:
Why would you think Congress would be proactive and get things done that will be most beneficial to taxpayers in a timely manner? Leopards typically don't change their spots and while Congress talks contantly about all the good things they are doing for their constituents, reality is that they rarely follow through.
Tax incentives that could be beneficial typically arent enacted or renewed until the 11th hour when taking advantage of them becomes a fire-drill (reducing the impact they could have).
Given the lack of insight, vision and ability to execute we have seen from Congress (as well as many state governments), the best that taxpayers can do is plan for the worst and be happy when something gets done that will help.
The current push to "enhance revenue" when we are moving to a global economy and our small businesses must compete against lower cost nations doesn't seem to make sense to me.
Why are we not talking about reducing spending as the key initiative?
Is there anyone that believes our government manages money and costs appropriately?
Trim the budget to a reasonable level first, help us compete globally and then we can talk about other ways to drive the economy before we start asking taxpayers to reach deeper into their pockets.
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