Although researchers have been unable to prove that the late Sen. Everett Dirksen, R-Ill., ever said it, he is memorably “quoted” as having said of federal government spending, “A billion here and a billion there, and pretty soon you’re talking real money.” If Dirksen didn’t say it, he should have, because it would certainly have been both appropriate and in character for him.
We thought of that this week as Congress passed an $858 billion bill to prevent massive tax increases on the American people and, in some cases, to cut taxes further.
Much of the continued tax relief is surely desirable, but some aspects of the bill – such as costly “alternative fuels” incentives – are not. We thought you’d like to note some of the provisions that otherwise might slip through the cracks of news reports. (We caution that while extended tax relief is listed as “reducing” tax collections, the higher taxes that would otherwise have been imposed would certainly harm long-term tax revenue by killing economic growth):
* There will be continued tax relief for taxpayers at every level. The top levy, on taxable income above about $379,000 will stay at 35 percent, rather than rise to 39.6 percent. The bottom income tax rate, on income below $8,500 for individuals and $17,000 for married couples, will be 10 percent, instead of rising to 15 percent. The tax collection “loss” is projected at $186.8 billion.
* Enhanced long-term unemployment benefits will cost $56.5 billion.
* Allowing higher itemized deductions for high-income households will reduce collections $20.7 billion.
* The top capital gains tax will be 15 percent, a collection “loss” of $25.9 billion.
* The top rate on dividends will be 15 percent, a reduction to the government of $27.3 billion.
* A child tax credit of $1,000 will reduce federal collections $71.7 billion.
* A 2010-11 federal income tax deduction for state and local sales taxes (geared toward people in nine states – including Tennessee – without a general state income tax) will reduce collections $5.5 billion.
* The Earned Income Tax Credit for low-income families will reduce tax revenue $15.7 billion.
* “Marriage penalty” relief provisions will reduce collections $18 billion.
* Increased depreciation and expensing for business capital investments will reduce collections $21.8 billion.
* Tax breaks on student loans, including exemptions for employer-provided educational aid, will amount to $3.3 billion.
* Deductions for higher-education tuition and related expenses for 2010-11 will amount to $1.2 billion.
* A tax credit up to $2,500 for higher-education expenses will total $17.6 billion.
* Incentives for producing, selling and using alternative fuels (such as ethanol) will be renewed through 2011, reducing collections $11.3 billion.
* Tax breaks for improvements to restaurants and other retail buildings for 2010-11 will reduce collections $3.6 billion.
* Tax breaks for investors in foreign banking, securities and insurance firms for 2010-11 will cost $9.2 billion.
* More than 20 million middle-income households will be spared tax increases averaging $3,900 from the Alternative Minimum Tax, amounting to $136.7 billion.
* The “death tax” rate on some estates will rise to 35 percent instead of 55 percent, forgoing collections of $68.1 billion that would have resulted from the higher rate.
* A one-year Social Security tax cut for all wage-earners (from 6.2 percent to 4.2 percent) will reduce collections $112 billion.
* A $250 deduction for out-of-pocket classroom expenses by teachers in 2010-11 will reduce collections $390 million.
* A business tax credit for research and experimentation for 2010-11 will amount to $13.3 billion.
* Older Americans will still be able to withdraw up to $100,000 a year from Individual Retirement Accounts tax-free to donate to certain charities in 2010-11, reducing collections $979 million.
If this little summary of the state of our tax laws doesn’t convince you that the laws are too complex, too varied and too expensive in many ways, what will?