Congress passed earlier this week the American Taxpayer Relief Act that will avert spending cuts and tax increases, which included as part of the bill a nine-month extension of the 2008 farm bill. All programs covered by the 2008 farm bill will be funded at current levels, including funding for conservation, energy, the Market Access Program, and the Foreign Market Development programs. The extension will keep a safety net in place while lawmakers craft a more traditional five-year bill in 2013. The extension expires September 30, 2013.
The extension of the farm bill, which includes a continuation of dairy programs, was struck by Vice President Joe Biden and Senator Minority Leader Mitch McConnell (R-KY).
Following are some highlights of the bill, which will allow the top income tax rate to rise to 39.6 percent from 35 percent for individuals earning $400,000 and couples earning $450,000:
- Make permanent the Bush-era tax breaks, extending the 33 percent, 28 percent, 25 percent and 10 percent brackets.
- Limit the ability of individuals earning more than $250,000 and couples earning more than $300,000 to claim individual-tax preferences.
- Permanently fix the alternative minimum tax (AMT), which was never indexed for inflation. The exemption amounts used to calculate the AMT would be adjusted for 2012, and the rules would be indexed for inflation in future years.
- Capital gains and dividends would be taxed at 20 percent for those earning more than $400,000. Those earning less would pay a top rate of 15 percent.
- Increase the top tax rate on large estates to 40 percent from 35 percent on a permanent basis. It would keep, and index to inflation, a $10 million exemption for couples that was set in 2011. The exemption was $5.12 million per spouse in 2012.
- Will allow the 2-percent payroll tax to lapse.
The bill will postpone the automatic spending cuts known as sequestration until March 1. The bill does not raise the debt limit, which Treasury has predicted the government would hit by December 31, 2012. The bill also blocks a pay increase for members of Congress for the duration of the 2013 fiscal year.
