Debate on Bush Tax Rates Begins

The Senate Finance Committee held hearings July 14 to begin the debate about the fate of the Bush tax cuts. At issue is whether they will be extended in all tax brackets or whether the extension will be limited only to those individuals with less than $200,000 of adjusted gross income ($250,000 on a joint return). Also in question is the fate of the 15% capital gains tax rate. President Obama has proposed that it revert to its pre-2001 level of 20%. The hearing was a broad-ranging policy discussion only. Markup on these issues is not anticipated until fall.

Concurrently, ranking Ways and Means Republican Dave Camp (MI) has sent a letter to Treasury Secretary Geithner asking for clarification of the Administration’s proposal on capital gains. Mr. Camp has asked the Secretary to state its intent as to whether the 20% rate would include the 3.8% Medicare tax on unearned income for upper income taxpayers and whether it would include the indirect tax rate increases related to the reinstatement of limitations on itemized deductions and personal exemptions that affect upper income individuals.

Notably, the dividends-paying community has a major stake in this debate, as well. If Congress does not act, the top tax rate on dividend income will revert to 39.6%. Current law taxes dividends at a top rate of 15%.

Linda Goold 202-383-1083, Samuel Whitfield 202-383-1131