This Week in Washington – Friday, December 17, 2010

Earlier today, President Obama signed H.R. 4853, the Middle Class Tax Relief Act of 2010, into law (more on the specifics below).  I am pleased that Congress and the Administration were ultimately able to work in a bipartisan manner to protect the American people from the largest tax increase in history. 
 
While I would have preferred a permanent extension for all taxpayers, this bill will help stabilize our economy and shows that Washington is finally ready to stop working against our nation’s greatest job creators: small businesses.  Congress can’t create the jobs we need for a full recovery.  It can – as it did in this case – help set the table for economic growth.
 
By assuring these entrepreneurs that these tax provisions won’t expire in the next two years and making key changes to the estate tax, we are taking a first step toward providing the certainty they need to begin hiring new employees and expanding their businesses.
 
This Week
 
On Thursday, the House approved the tax relief extension bill by a vote of 277—148.  While the economy still needs more certainty and less government spending to truly promote economic growth, the tax compromise bill will prevent a $3.8 trillion tax increase on all Americans and a further worsening the nation’s fragile economy.
 
Specifically, the bill provides a two year extension of all current tax rates, as well as the 15 percent rate on capital gains and dividends.  It extends the child tax credit, the earned income tax credit, marriage penalty relief, and the American Opportunity tax credit.   

The legislation also provides a one year payroll-tax reduction, a two year Alternative Minimum Tax patch, 100 percent expensing for small businesses, extends the R&D business tax credit, and continues a number of refundable tax credits expanded or initiated in 2009.  Additionally, the bill prevents the death tax rate from rising to 55 percent, which would have happened had no action been taken.

Enacting this bill achieves the following:

• The bill prevents an average tax increase of $1,540 on middle-income families;

• It prevents the lowest tax bracket from increasing to 15 percent, a tax increase that would have resulted in a minimum tax hike of $503 on 88 million taxpayers;

• It prevents the tax increase on capital gains and dividend, which would have hit half of all income tax paying seniors citizens by an average of $1,700; and

• The bill removes more than 35,000 taxable estates and businesses from the death tax relative to 2011 tax law.
 
On Friday, the House approved H.J.Res. 150, a Continuing Resolution (CR) providing discretionary funding for government operations at FY 2010 levels through December 21, 2010.  This three day CR extends all non-emergency discretionary funding through next Tuesday.  The current CR, under which we are currently operating, was set to expire on Saturday, December 18, 2010.  The legislation provides continued funding to prevent a government shut-down while the Senate completes consideration of a longer-term CR.  This is short term patch to keep the government operational until the House can re-address the issue next week.

The House will be in session next week.  Have a great weekend.

Sincerely,
Sam Graves