The Mother of All Tax Hikes
Rep. Charlie Rangel, the chairman of the House Ways & Means Committee, released his huge tax hike plan today. Here are the details, which I received from a contact of mine on the Hill.
Individual Tax:
- Repeal AMT for 2008 and beyond
- Expanded tax benefits for low-income individuals (EITC expansion, increase in the standard deduction, increase refundability of the child tax credit).
- Offset by a surtax on AGI (not taxable income) on single people with AGI over $150,000 and married couples filing jointly with AGI over $200,000.
- The surtax will start at 4% but rise to 4.6% for incomes over $500,000 (not clear if that is the attachment point for singles, marrieds, or both).
Extenders:
- One year AMT patch for 2007
- One year extension of all provisions that expire at the end of 2007
- Paid for with carried interest, taxing deferred compensation plans of offshore hedge funds, and basis reporting on securities.
- Additional money will be raised by enforcing requirements that S Corps that provide services pay payroll taxes.
- No specifics were given on the policy, but the staff did indicate that the carried interest and deferred compensation changes, together, would raise something above $40 billion.
Corporate Title:
- Lower the corporate tax rate to 30.5%
- Repeal Section 199 manufacturing deduction
- Repeal accounting method (which we assume to mean repeal LIFO and require current LIFO users to trigger their LIFO reserves and pay taxes on those amounts).
- Defer deductions for certain expenses of foreign subsidiaries of U.S. companies until the money is repatriated to the U.S.
