POLITICS

Tax portion of ‘fiscal cliff’ deal done — senior GOP source

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Politics,Beltway Confidential,Philip Klein,Taxes,Fiscal Cliff

Senate Republicans and the White House have reached a deal on the tax portion of the “fiscal cliff” showdown, according to a senior Republican source, but spending remains an outstanding issue.

The basic parameters on the deal are as follows:

– Bush era tax rates would be made permanent on all income below $400,000 for individuals and $450,000 for families.

– The capital gains tax rate would permanently remain at 15 percent for income under $400,000 for individuals and $450,000 for families, and it would go up to 20 percent on income above that.

– There would be a permanent fix to prevent the Alternative Minimum Tax (originally intended to capture more taxes from a small number of millionaires) from hitting tens of millions of middle class families.

– The estate tax would be permanently set at 40 percent, with an exemption on estates below $5 million. The current rate is 35 percent, but that’s scheduled to rise to 55 percent after midnight and the exemption is slated to go down to $1 million.

– The personal exemption phaseout (known as PEP) and the limitation on itemized deductions (known as Pease after the Congressman who sponsored it) would be made permanent, with the thresholds at $250,000 for individuals and $300,000 for married couples.

– The current child tax credit would be extended five years and there would be a one-year extension of the special 50-percent depreciation allowance for businesses.

– The assumption is that the payroll tax holiday will expire.

Any deal would still have to gain the support of a critical mass of Republicans and Democrats in the Senate and House to actually become law and there still hasn’t been an agreement on the spending side.

Spending issues include — avoiding scheduled physician payment cuts under Medicare, extending unemployment insurance and replacing automatic spending cuts from the so-called sequester. Democrats have been reluctant to offer spending cuts to offset new spending.

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