Plan B. House Speaker Boehner has proposed a “Plan B” that would increase the top rate to 39.6% for taxpayers with taxable income over $1 million. Tax Analysts reports ($link):
Boehner’s Plan B would also permanently extend the alternative minimum tax patch and the current-law estate and gift tax rules with a portable $5 million individual exemption and a 35 percent top rate. Dividends and long-term capital gains would be taxed at 15 percent for income below $1 million and at 20 percent above that threshold. The bill would not renew any tax extenders, emergency unemployment insurance, or the 2 percentage point payroll tax cut, and would not raise the federal debt limit.
It’s nice to see a permanent AMT fix in both the Boehner and Obama plans. I like not renewing any of the “extenders,” but I suspect he plans to do that separately next year anyway. An estate tax fix is also welcome. It looks like there is no hope continuing the 15% rate for dividends or capital gains.
Meanwhile, a blizzard approaches. From KCCI.com:
Six to 12 inches of snow is expected by Thursday morning. The heaviest snow axis will be along a line from near Des Moines to Tama. The lowest amounts are expected near the Missouri border. Snow drifts several feet deep will be possible given the strong winds.
Winds will become very strong Wednesday night from the north northwest. Sustained winds of 25 to 35 mph are expected with gusts over 45 mph possible.
Fiscal Cliff Notes
Wall Street Journal, Boehner Weighs ‘Cliff’ Backup Plan
Andrew Lundeen, How Many Days of Christmas Could the Fiscal Cliff Buy? (Tax Policy Blog)
Joseph Thorndike, Republicans Shouldn’t Pin Their Hopes on The Origination Clause. “In practice, the Origination Clause is more a nuisance than an obstacle to tax-happy senators.”
Howard Gleckman, What Adjusting the Price Index Would Mean for Taxpayers (TaxVox)
Rudy Penner, How to Control Entitlements: A Challenge Ike Did Not Face (TaxVox)
The study finds that an increase in the marginal income tax rate leads to a decrease in the average skill of the NBA free agents that migrate to that team. Unlike in baseball, basketball teams in high-tax jurisdictions actually end up with a worse free-agent talent pool, all else equal. …
These papers do serve as a useful reminder that if the goal is to remedy income inequality, state and local taxes are a weak policy instrument. To the extent that tax policy is used to achieve redistribution, redistribution should take place at the federal level.
Despite what Warren Buffett, the President, and the Speaker of the House say, marginal rates matter. That’s also true at the state level; when you have to bribe businesses to locate in your state, as Iowa likes to, you have a sick tax system. Related: David Brunori, If the Shoe Fits: Oregon Lawmakers Get Rolled (Tax.com)
Paul Neiffer, Annual Exclusion Does Not Eat Into Lifetime Exclusion.
Trish McIntire, Identity Theft PIN
Robert Goulder, Starbucks Pays More Tax Than It Owes (Tax.com). That’s silly.
It’s Wednesday, so it’s time for a fresh Buzz. Robert D. Flach obliges.
The world is saved from its most dangerous criminals. Quebec Police Arrest 3 in Maple Syrup Heist