Friday May 17, 2013
Washington News
Payroll Tax Extension Passed
After lengthy debate, the House and Senate passed a two month extension of the payroll tax cut on a unanimous voice vote. The President signed the bill on Friday, December 23.
Under the bill, the employee payroll tax will be reduced from 6.2% to 4.2% for the months of January and February of 2012. The federal unemployment benefits were in danger of lapsing for 1.8 million long-term unemployed Americans. These will also be continued for two months.
Each year since 2003, Congress has passed the "Doc Fix." Medicare reimbursements would decline by 27% if Congress did not change the physician reimbursement rules. However, the American Medical Association points out that even with reimbursements at the current rate, most physicians are receiving payments from Medicare that are 20% below the amounts received for other patients.
President Obama lobbied in favor of the payroll tax reduction. He stated, "At a time when so many Americans are working harder and harder just to keep up, the extra $1,000 or so that the average family would get from this tax cut makes a real difference when you're trying to buy groceries or pay the bills, make a mortgage or make a repair."
The Ranking Republican on the Senate Finance Committee is Orrin Hatch (R-UT). He also supported the bill and stated, "Though I remain concerned with the continued extension of a temporary payroll tax holiday and its long-term implications for Social Security, I'm supporting this legislation because it allows the construction of the Keystone XL Pipeline to move forward and prevents physicians from getting hit with a 27.4% pay cut that could hinder access to quality care for American seniors."
Editor's Note: After the holiday break, Congress will return in January and commence negotiations on a full year extension. Because this is an election year, the extension is likely to be passed. However, the debate will continue over the methods to pay for the cost of the payroll tax cut.
The payroll tax reduction bill signed by President Obama failed to include two important tax provisions. Each year for the past two decades, Congress has passed approximately 40 different "tax extenders" and has also adjusted the alternative minimum tax (AMT) exemption for inflation. Neither of these provisions were included in the payroll tax bill.
Senate Finance Committee Chairman Max Baucus (D-MT) has supported the tax extenders bill each year. He published a press release and indicated that he will fight "to find a bipartisan path forward for these tax extenders, including the research and development (R&D) tax credit, teachers' expense deduction and job-creating clean energy tax incentives. It is critical to extend these tax provisions early in the year to maximize their effect and provide certainty for the 2012 tax year."
The tax extenders include six charitable provisions. The most popular of these is the IRA charitable rollover. Since 2006, IRA owners have been permitted to transfer up to $100,000 directly from the IRA to qualified charities. In prior years (such as 2010) the extension was passed later in the year and it was difficult for many IRA owners to assist their charities through an IRA rollover. Chairman Baucus is asking members of Congress to act early in the year so that donors may plan their 2012 IRA rollovers well before the end of the year.
Editor's Note: Because 2012 is an election year, there is a reasonably good prospect for passage of the tax extenders. The IRA charitable rollover now has been effective for the past six years. While there are great differences in Congress, there could be passage of the IRA charitable rollover and other tax extenders for 2012. Hopefully, Congress will follow the advice of Chairman Baucus and take action before the very end of the year. Even though the tax extenders bills have been retroactive to January 1, it is difficult for many IRA owners to plan if Congress passes the bill very late in the year.
Under the bill, the employee payroll tax will be reduced from 6.2% to 4.2% for the months of January and February of 2012. The federal unemployment benefits were in danger of lapsing for 1.8 million long-term unemployed Americans. These will also be continued for two months.
Each year since 2003, Congress has passed the "Doc Fix." Medicare reimbursements would decline by 27% if Congress did not change the physician reimbursement rules. However, the American Medical Association points out that even with reimbursements at the current rate, most physicians are receiving payments from Medicare that are 20% below the amounts received for other patients.
President Obama lobbied in favor of the payroll tax reduction. He stated, "At a time when so many Americans are working harder and harder just to keep up, the extra $1,000 or so that the average family would get from this tax cut makes a real difference when you're trying to buy groceries or pay the bills, make a mortgage or make a repair."
The Ranking Republican on the Senate Finance Committee is Orrin Hatch (R-UT). He also supported the bill and stated, "Though I remain concerned with the continued extension of a temporary payroll tax holiday and its long-term implications for Social Security, I'm supporting this legislation because it allows the construction of the Keystone XL Pipeline to move forward and prevents physicians from getting hit with a 27.4% pay cut that could hinder access to quality care for American seniors."
Editor's Note: After the holiday break, Congress will return in January and commence negotiations on a full year extension. Because this is an election year, the extension is likely to be passed. However, the debate will continue over the methods to pay for the cost of the payroll tax cut.
Baucus Promotes Tax Extenders
The payroll tax reduction bill signed by President Obama failed to include two important tax provisions. Each year for the past two decades, Congress has passed approximately 40 different "tax extenders" and has also adjusted the alternative minimum tax (AMT) exemption for inflation. Neither of these provisions were included in the payroll tax bill.
Senate Finance Committee Chairman Max Baucus (D-MT) has supported the tax extenders bill each year. He published a press release and indicated that he will fight "to find a bipartisan path forward for these tax extenders, including the research and development (R&D) tax credit, teachers' expense deduction and job-creating clean energy tax incentives. It is critical to extend these tax provisions early in the year to maximize their effect and provide certainty for the 2012 tax year."
The tax extenders include six charitable provisions. The most popular of these is the IRA charitable rollover. Since 2006, IRA owners have been permitted to transfer up to $100,000 directly from the IRA to qualified charities. In prior years (such as 2010) the extension was passed later in the year and it was difficult for many IRA owners to assist their charities through an IRA rollover. Chairman Baucus is asking members of Congress to act early in the year so that donors may plan their 2012 IRA rollovers well before the end of the year.
Editor's Note: Because 2012 is an election year, there is a reasonably good prospect for passage of the tax extenders. The IRA charitable rollover now has been effective for the past six years. While there are great differences in Congress, there could be passage of the IRA charitable rollover and other tax extenders for 2012. Hopefully, Congress will follow the advice of Chairman Baucus and take action before the very end of the year. Even though the tax extenders bills have been retroactive to January 1, it is difficult for many IRA owners to plan if Congress passes the bill very late in the year.
Published December 23, 2011
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