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Tax Policy Center Analysis of the American Taxpayer Relief Act (ATRA)

ATRA makes permanent most of the tax cuts enacted between 2001 and 2010 and extends other tax provisions for between one and five years. The following links provide a detailed description of ATRA's provisions and tables showing the law’s distributional effects and effective marginal tax rates on different sources of income.

Provisions of the American Taxpayer Relief Act of 2012


Comparison of Tax Parameters for 2013 Under ATRA, Patched 2012 Law, and Pre-ATRA 2013 Law


Distribution Tables

  1. Pre-ATRA Current Law Baseline
  2. Pre-ATRA Current Policy Baseline
  3. Patched 2012 Law Baseline
  4. Effects of Separate Provisions

Marginal Tax Rate Tables

  1. Marginal Tax Rates on Wages and Salaries
  2. Marginal Tax Rates on Capital Income

You can also see how ATRA will affect sample taxpayers relative to alternative tax policies using TPC’s Tax Calculator.


Provisions of the American Taxpayer Relief Act of 2012 (ATRA)

The American Taxpayer Relief Act of 2012 (ATRA) extended a majority of tax cuts originally passed in 2001, 2003, and 2009. Tax provisions extended include:

  • Permanent extension of certain 2001 tax cuts:
    • Retain individual income marginal tax rate structure of 10, 15, 25, 28, 33, and 35 percent for taxable income under $400,000 ($450,000 for married taxpayers filing jointly); the thresholds are indexed for inflation after 2013.
    • Repeal of the limitation on itemized deductions (Pease) and the personal exemption phaseout (PEP) for AGI under $250,000 ($300,000 for married taxpayers filing jointly); the thresholds are indexed for inflation after 2013.
    • Child tax credit (CTC) of $1,000 per child; 15 percent partial refundability based on earnings above $10,000; indexed for inflation after 2001. (See below for additional enhancements to the CTC contained in the bill.)
    • Marriage penalty relief for the standard deduction, earned income tax credit (EITC), and the 15 percent bracket.
    • Education Tax Relief, including an increase in the annual contribution limit to Coverdell Education Savings Accounts, an extension of the exclusion for employer provided education assistance, and an increase in the phaseout ranges for the student loan interest deduction.
    • Child and dependent tax care credit rate of up to 35 percent on eligible expenses up to $3,000 per child (to a maximum of $6,000), with the phaseout beginning at AGI of $15,000.
    • $5 million effective estate and gift tax exemption (indexed for inflation from 2011); top estate tax rate of 40 percent.
  • Permanent extension of certain 2003 tax cuts:
    • Retain 15 percent tax rates on long-term capital gains and qualified dividends (0 percent for those who would otherwise be in the bottom two tax brackets) for taxpayers in all but the top income tax bracket; 20 percent rate for those in the top bracket; repeals the 8 and 18 percent tax rates on capital gains from the sale of assets held for more than five years.
  • Extension through 2017 of certain 2009 tax cuts:
    • Extend the American opportunity tax credit (AOTC).
    • Reduce the earnings threshold for the refundable portion of the child tax credit to $3,000, not indexed for inflation.
    • Earned income tax credit (EITC) threshold for couples filing jointly at $5,000 (indexed from 2008) above the phaseout for single filers and a 45% phase-in rate for families with three or more children.
  • Permanent Alternative Minimum Tax (AMT) relief: increase of the AMT exemption amount to $50,600 ($78,750 for married taxpayers filing jointly) in 2012; the AMT exemption amount, exemption phaseout threshold, and income bracket are indexed for inflation beginning in 2013.
  • Various individual, business, and energy tax extenders.

Note: ATRA did not extend the 2 percentage point reduction in payroll taxes that was in effect for 2011 and 2012.

See the Joint Committee on Taxation’s estimates of the revenue effects of ATRA for a full list of provisions included in the bill.


Comparison of Tax Parameters for 2013 Under ATRA, Patched 2012 Law, and Pre-ATRA 2013 Law


Distribution Tables

TPC has produced tables showing the distributional effects of ATRA against three different baselines. Click on a baseline below to read a brief description and see links to the corresponding distribution tables.

  1. Pre-ATRA Current Law Baseline
  2. Pre-ATRA Current Policy Baseline
  3. Patched 2012 Law Baseline
  4. Effects of Separate Provisions


Pre-ATRA Current Law Baseline

The current law baseline is the tax law that would have been in place for 2013 if Congress had not enacted ATRA. It assumes that the 2001, 2003, and 2009 tax cuts expire and we essentially return to the law in place before the 2001 tax act. (The 2006 Pension Protection Act made most of the savings and pension provisions in the 2001 tax act permanent.)

The following tables show the effects of ATRA’s major individual income tax and estate tax provisions and exclude the effects of certain business extenders and other provisions.

Baseline: Pre-ATRA Current Law
Cash Income Level
Cash Income Percentile


Pre-ATRA Current Policy Baseline

The current policy baseline generally assumes that 2012 law continues for all future years, regardless of scheduled sunsets or other changes (except for the payroll tax cut and the health care legislation). For 2013, the current policy baseline would extend the 2001, 2003, and 2009 tax cuts for taxpayers of all income levels; keep the estate tax rate at 35 percent with a $5 million exemption (indexed); patch the AMT as in the Senate Republican proposal (S.3413); allow the payroll tax cut to expire; and allow health care legislation taxes to take effect.

Relative to current policy, ATRA:

  • Creates a 39.6 percent tax bracket for taxable income above $400,000 ($450,000 for married taxpayers filing jointly); indexed for inflation after 2013.
  • Reinstates PEP and Pease for taxpayers with AGI above $250,000 ($300,000 for married taxpayers filing jointly); indexed for inflation after 2013.
  • Taxes long-term capital gains and qualified dividends at a 20 percent rate for taxpayers in the top income tax bracket.
  • Increases the estate tax rate to 40 percent.
  • Provides a more generous AMT patch in 2013 than in S.3413

The following tables show the effects of ATRA’s major individual income tax and estate tax provisions and exclude the effects of certain business extenders and other provisions.

Baseline: Pre-ATRA Current Policy
Cash Income Level
Cash Income Percentile


Patched 2012 Law Baseline

The patched 2012 law baseline for 2013 differs from the current policy baseline for 2013 in that it assumes the extension of the payroll tax cut, repeal of the health care legislation taxes on earnings and investment income, and repeal of the 10 percent limitation on the deductability of medical expenses.

In addition to all the changes listed above for the current policy baseline, relative to the patched 2012 law baseline, ATRA:

  • Allows the 2 percentage point payroll tax reduction to expire.
  • Allows the taxes associated with the health care legislation to take effect.

TPC has produced tables for 2013 against the patched 2012 law baseline that exclude the effects of certain business extenders and other provisions as well as tables that include these provisions.

Baseline: Patched 2012 Law
Excluding Business Extenders and Other Provisions
Including Business Extenders and Other Provisions


Effects of Separate Provisions in 2013

TPC has also produced a set of distribution tables that sequentially add sets of provisions from ATRA in order to present the effects of separate provisions. The sequence begins with patched 2012 law as a baseline.


Separate Sets of Provisions, Added Sequentially
1. Payroll Tax
2. Health Care Law Provisions
3. High Income Capital Gains and Dividends
4. High Income Rates, Pease, and PEP
5. Extenders
6. Estate Tax
7. Alternative Minimum Tax Patch
All ATRA Provisions

2013 Marginal Tax Rates

The links below lead to tables that compare effective marginal tax rates on capital income and on wages and salaries for 2013 under ATRA, patched 2012 law, and pre-ATRA law (current law baseline).

Comparison of Effective Marginal Tax Rates