Kelly Bullis: What we can expect from U.S. Congress
September 1, 2012
School has started back up again (some children are fighting depression over it while others are elated), there are only 113 shopping days left until Christmas (which means we guys still have 112 days before starting our Christmas shopping) and Congress has yet to act on tax matters that affect 2012 and beyond.
We’re also experiencing a wonderful event that happens once every two years: Congress is in election mode. That means a lot of posturing, but not much acting. Kind of reminds me of an octopus on roller-skates – a flurry of activity, but not going anywhere.
So, once the November elections have ended, what might we expect from the lame-duck Congress before year end?
The big issue involves the Bush tax cuts currently set to expire at the end of 2012. I’m amazed that they are even still around. When they were originally enacted, the intent was to temporarily cut tax rates right after 9/11 to help the economy recover from the shock of that event and not go into a recession.
One has to wonder how these temporary cuts have become ingrained into the psyche of Congress that they think they have to keep extending them.
Current expectations are that they will vote to extend them through 2013.
There is a small chance that Congress may tinker with the tax rates on high-income folks. I rather doubt they will succeed.
When the dust is settled from November, Congress will not have much time to debate any changes, so expect them to just extend everything as is for one more year.
Another “temporary measure” that seems to be moving into the semi-permanent category (to the major detriment of properly funding Social Security), is the payroll tax cut (the 2 percent drop in employees’ share of Social Security tax).
I expect Congress to extend this once again, but they might not. We’ll see.
There are a few other popular tax breaks that expired in 2011 and are yet to be extended for 2012, such as the $250 deduction for teacher supplies (given the fact that the average teacher spends much more each year, this is almost an insult, but it makes Congress feel good to keep extending this); direct IRA contributions to charity; the Research and Development Credit, write-offs for state sales tax (a big benefit for Nevadans since we don’t have a state income tax); and college tuition credits.
It’s a toss-up which of these Congress will extend. Probably all of them.
Estate taxes are also about to get ugly unless Congress acts. Currently, you can die and leave $5.12 million and the rest taxed at a maximum rate of 35 percent. If Congress doesn’t act in 2013, this drops to only leaving $1 million and the rest taxed at 45 percent.
My sources think Congress will extend the current status, but nobody knows for how long. This makes estate planning very hard.
Did you hear what the old farmer once said? “Good judgment comes from experience, and a lot of that comes from bad judgment.”
• Kelly Bullis is a certified public accountant in Carson City. Contact him at 882-4459, on the web at BullisAndCo.com.