Jan. 2, 2013 – The 112th Congress passed a bipartisan compromise Tuesday that allows some increase in personal income taxes and delays across-the-board federal spending cuts for two months.
The package, which won final passage in the House at about 11:05 p.m., raises the top marginal income tax rate from 35 percent to 39.6 percent for individuals with more than $400,000 in income and married couples with more than $450,000. Payroll taxes are expected to go up for most households this year; a temporary payroll tax “holiday” in place over the past two years is being allowed to expire.
The package also includes a set of “tax extenders” passed by the Senate Finance Committee in August. Aimed at providing some level of certainty for families and business owners, this package includes a one-year extension of mortgage debt relief that allows an exclusion of up to $2 million in forgiven debt from family income.
The agreement also includes, among other things, a permanent adjustment for the alternative minimum tax; a cap on itemized deductions for individuals making $250,000 and married couples making $300,000; an increase in estate tax rates for some; and a one-year extension of unemployment benefits.
The agreement has no impact on the credit union federal income tax exemption, but it does help set the stage for the debate about larger corporate tax reform when the 113th Congress is sworn in tomorrow. NAFCU is continuing its efforts to ensure preservation of the exemption in any federal tax reform package.
Tuesday's deal was worked out between Vice President Joe Biden and Senate Minority Leader Mitch McConnell, R-Ky. The Senate approved the package Tuesday morning on a vote of 89-8. In the House, the package was cleared on a vote of 257-167. The president is expected to sign it.