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Alternative Buffett Rule Baseline

Alternative Buffett Rule Baseline

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Published by: The Washington Post on Apr 23, 2012
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04/24/2012

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<!CongresS'oftbe
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20515-6453
MEMORANDUM
MAR262012
FROM:MarkPrater,JimLyons,andAaronTaylorThomas
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Barthold
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SUBJECT:RevenueEstimateThismemorandumisinresponsetoyourrequestofMarch19,2012,forarevenueestimateofS.2059,the"PayingaFairShareActof2012"estimatedafterapermanentextensionofa"currentpolicy"baseline.Forthepurposeofthisestimate,wehaveassumedthe"currentpolicy"baselineimpliesapermanentextensionofthe"EconomicGrowthandTaxReliefReconciliationActof2001('EGTRRA'),"the"JobsandGrowthTaxReliefReconciliationActof2003('JGTRRA'),"andthe"AmericanRecoveryandReliefActof2009('ARRA')."Undertheproposal,themaximumstatutoryrateonordinaryincomeis35percentandthemaximumrateoncapitalgainsandqualifieddividendincomeis15percent.(Underpresentlawbeginningin2013,anadditional3.8-percenttaxwillbeimposedonthenetinvestmentincomeofcertainindividualsandanadditionalhospitalinsurancetaxequalto0.9percentofwageswithrespecttoemploymentinexcessof$200,000($250,000inthecaseofajointreturn)isalsoimposed.)The"currentpolicy"baselinewouldpermanentlyextendcurrentestateandgifttaxpolicy.Underpresentlaw,asmodifiedbyTitleIIIofthe"TaxRelief,UnemploymentInsuranceReauthorization,andJobCreationActof2010(the'TaxReliefAct'),"theestateandgifttaxesforestatesofdecedentsdyingandgiftsmadeafter20
I
generallyareunified,withafivemilliondollarexemptionequivalentamountandataxrateof35percent.ThefivemilliondollarexemptionamountisindexedforinflationfordecedentsdyingandgiftsmadeafterDecember31,20
11.1
ForestatesofdecedentsdyingafterDecember31,2010,andbeforeJanuary1,2013,survivingspousesgenerallyarepermittedtoutilizetheunusedportionofapredeceasedspouse'sestatetaxexemption.
In
addition,theTaxReliefActextended,through2012,subtitlesF,G,andHofTitleVofEGTRRA,whichincludespecialrulespertainingtoconservationeasements,thegenerationskippingtransfertax,andtheextensionoftimetopayestatetaxes,respectively.The"currentpolicy"baselinewouldindexthealternativeminimumtax("AMT")exemptionamountforinflationandindextheincomethresholdsforthe28-percentbracketand
I
For
2012,
theinflation-indexedexemptionamountis$5.12million.
 
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TO:SUBJECT:
MarkPrater,JimLyons,andAaronTaylorRevenueEstimatePage2startingpointofthephaseoutoftheAMTexemptionamount.Also,thebaselinewouldallownon-refundablepersonalcreditstoapplyagainsttheAMT.UnderS.2059,anewtaxwouldbeimposedoncertainhigh-incometaxpayers.Theamountofthetaxwouldequaltheexcess(ifany)ofataxpayer'stentativefairsharetaxforthetaxableyearoverthesumofthetaxpayer's(a)regulartaxliability(lessallowablecreditsexceptfortheforeigntaxcredit),(b)alternativeminimumtax,and(c)payrolltax,wherethepayrolltaxincludestheemployee'sshareoftheOASDIandHIportionsofFICAtaxes,theadditional3.8-percenttaxonnetinvestmentincome,andanyself-employmenttaxeslessthedeductionforself-employmenttaxespermittedundersection164(f)oftheCode.Thetaxpayer'stentativefairsharetaxequals30percentofthetaxpayer'sadjustedgrossincome("AGI")lessmodifiedcharitablecontributions,wheremodifiedcharitablecontributionsequalthetaxpayer'sallowablecharitabledeductionundersection170oftheCodemultipliedbytheratioofthetaxpayer'stotalitemizeddeductionaftertheoveralllimitationofitemizeddeductionsundersection68oftheCodetototalitemizeddeductionbeforetheapplicationofsection68.ThenewtaxwouldapplytotaxpayerswithAGIinexcessofonemilliondollars($500,000formarriedindividualsfilingaseparatereturn).ThetaxwouldbephasedinfortaxpayerswithAGIbetweenonemilliondollarsandtwomilliondollars($500,000andonemilliondollarsformarriedindividualsfilingaseparatereturn).TheAGIthresholdswouldbeindexedforinflationforyearsafter2013.S.2059wouldbeeffectivefortaxableyearsbeginningafterDecember31,2012.Forpurposesofestimatingtheproposal,wehaveassumedanenactmentdateofMay1,2012.Attachment:Table#12-2041
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