I honestly believe that tax pros and taxpayers are being held hostage by many in Congress to save face.
Yesterday, as I’m sure you know, Rep. Boehner pulled his “Plan B” House bill because he couldn’t get enough support from his own party to pass it and told the White House that they (the WH) needs to come up with a new plan. (Actually, the WH has a plan on the table Mr. Boehner. Negotiation protocol means the next proposal should be one that your people support.) Then the House closed up for Christmas. Who knows if they’ll do anything when they get back to work after Christmas. But I bet they’ll get right to work after the first of the year and the Bush tax cuts have expired. They need to make the con look good.
After January 1, 2013, the tax increases many Republicans won’t even consider will become tax cuts that will make them look so good to taxpayer voters. On January 1st, tax rates and the rest of the extenders revert to 2001 levels. Everyone’s taxes will go up. Everyone’s taxes. Then Congress can do what it has put off all year and extend the lower rates for almost everyone. The only questions will be what will the highest rate be and what will the thresholds be on that rate? That fixed, our politicians can con tell everyone, with a straight face, how wonderful they are for cutting taxes.
As for the Alternative Minimum Tax (AMT) patch that is tied in with the Bush extenders, Congress can quickly pull it out after Christmas break and extend it or leave it with the tax provisions that die on December 31st. AMT has already expired and will be a major problem when taxpayers file their 2012 taxes if the patch isn’t continued. If Congress doesn’t pass the AMT patch in 2012, many middle class taxpayers will find their 2012 taxes are higher than estimated. (An estimate I did a few weeks ago showed an AMT of $615 for a family of 4 with $75,000 in income.) Of course, if I was really cynical, I would say that some in Congress are playing with AMT to make their tax “cuts” look better as taxpayers forget all the details and focus on their pocketbook.
In the spirit of Christmas, I hope I’m wrong about what some in Congress are thinking. If I’m not, I really hope that they will deal with AMT separately. But right now I’m not optimistic at all. It seems like a con job to me.