The Tax Policy Center has analyzed several approaches to extending some of the tax cuts originally passed in 2001 through 2010. Click on an option below to read a brief description and to see links to tables showing the distributional effects of the tax changes.
Permanently extend all 2001-2003 tax cuts except on incomes above $1 million; tax capital gains and qualified dividends at 20 percent in the top bracket; allow the tax cuts enacted in 2009 to expire; and extend 2012 estate and gift tax law (Speaker Boehner’s “Plan B” proposal).
This proposal, relative to current policy, would allow the top individual income tax rate to return to 39.6 percent by creating a new 39.6 percent tax bracket. The bracket would apply to taxable income above $1 million (half that amount for married couples filing separately). This amount would be indexed for inflation after 2013. The proposal would also tax capital gains and qualified dividends at 20 percent for taxpayers in the top bracket.
This plan would permanently patch the AMT by setting the 2012 exemption amounts at $78,750 for married couples filing jointly ($50,600 for singles) and indexing that amount for inflation plus 0.75 percentage points after 2012. The tax bracket threshold and exemption phase-out threshold would be similarly indexed for inflation plus 0.75 percentage points, and personal non-refundable credits would be allowed regardless of tentative AMT.
The proposal would not extend the 2009 expansions of the child tax credit (CTC) and earned income tax credit (EITC), and would repeal the American Opportunity Tax Credit (AOTC).
TPC has produced distributional analysis of this option
against both current law and current policy for the 2013 calendar year.
See the Joint Committee on Taxation's estimate of the revenue effects of this proposal