By Sara Wyant
© Copyright Agri-Pulse Communications, Inc.
Washington, Dec. 3 – Senate Finance Committee Chairman Max Baucus (D-MT) introduced legislation to permanently cut taxes for middle class families making up to $250,000 and individuals making up to $200,000 per year. The legislation would also help create jobs by extending critical tax cuts for individuals, families and employers. And the bill would provide families with greater tax certainty by instituting a permanent estate tax policy at 2009 rate and extending tax credits for ethanol and biodiesel for one year, says the Montana Senator.
“Our bill permanently cuts tax rates for middle class families to help them meet the challenges of these tough economic times,” said Baucus. “When families and businesses know what to expect from our tax system, they can plan, they can spend and they can expand. Our legislation cuts taxes and provides certainty to families, individuals and investors, giving them confidence to help our economy grow. Middle class families are critical to the continued recovery of our economy and this bill provides the tax relief and job-creation incentives they need to thrive.”
The Middle Class Tax Cut Act of 2010 would permanently cut tax rates to 10, 15, 25, 28 and 33 percent for individuals making up to $200,000 and families making up to $250,000. Without these tax cuts, the middle class would pay taxes at rates of 15, 28, 31 and 36 percent next year.
The bill would also make the child tax credit permanent as well as the 2009 estate tax rate of 45 percent, with an exemption for estates under $3.5 million, indexed for inflation. And this estate tax policy recognizes the unique estate planning challenges of family ranchers and farmers across the country. The legislation would make permanent the current 15 percent rate for capital gains for individuals making up to $200,000 and families making up to $250,000. The bill also continues to treat dividends as capital gains rather than ordinary income. It would also repeal the controversial 1099 information reporting requirements that the Senate failed to repeal earlier this week when both Democrats and Republicans attempted to attach it to the food safety bill in two different amendments.
Some key provisions:
Permanent estate, gift and generation skipping transfer tax relief. The EGTRRA phased-out the estate and generation-skipping transfer taxes so that they were fully repealed in 2010, and lowered the gift tax rate to 35 percent and increased the gift tax exemption to $1 million for 2010. The proposal reinstates the 2009 law for the estate, gift, and generation skipping transfer taxes permanently, setting the exemption at $3.5 million per person and $7 million per couple and a top tax rate of 45 percent. The exemption amount is indexed beginning in 2011. The proposal is effective January 1, 2010, but allows an election to choose no estate tax and modified carryover basis for estates arising on or after January 1, 2010 and before the date of introduction. The proposal is effective upon date of introduction for gift and generation skipping transfer taxes.
Portability of unused exemption. Under current law, couples have to do complicated estate planning to claim their entire exemption (currently $7 million for a couple). The proposal allows the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse without such planning.
Deferral of estate tax for farmland. The proposal allows taxpayers to defer the payment of estate taxes on farmland of a family farm until the farmland is sold or transferred outside the family or ceases to be used for farming. The proposal also increases the valuation adjustment for donations of a conservation easement.
Ethanol. The bill extends through 2011 the per-gallon tax credits and outlay payments for ethanol. The blender’s credit would be extended at a rate of 36 cents per gallon, while the small producer’s credit would be extended at a rate of 8 cents per gallon. The bill also extends through 2011 the existing 14.27 cents per liter (54 cents per gallon) tariff on imported ethanol and the related 5.99 cents per liter (22.67 cents per gallon) tariff on ethyl tertiary-butyl ether (ETBE).
Biodiesel and renewable diesel. The bill extends through 2011 the $1.00 per gallon production tax credit for biodiesel, and the small agri-biodiesel producer credit of 10 cents per gallon. The bill also extends through 2011 the $1.00 per gallon production tax credit for diesel fuel created from biomass.
To read the entire proposal, go to: http://finance.senate.gov/newsroom/chairman/release/?id=a0c2f257-e293-4d75-bfb6-628ce43f36f3
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