Big Difference in Congressional Tax Bills

NEW YORK -- The tax panels of the House and Senate each passed tax bills Tuesday evening that differ in two key ways: Only the House version calls for an extension of the reduced rates on capital gains and dividends; while only the Senate version calls for major AMT relief in 2006, CNN/Money reported.

After postponing its vote three times in less than a week, the Senate Finance Committee finally passed a revised tax bill by a vote of 14 to 6 that omitted a provision that would extend reduced investment tax rates. Former Republican holdout Olympia Snowe of Maine voted in favor of it as did three Democrats on the committee -- Sen. Max Baucus, D-Montana, the committee's ranking Democrat, Sen. Blanche Lincoln, D-Arkansas and Sen. Charles Schumer, D-NY.

The tax reduction for investment income could reappear in the final tax cut because they were advanced in version of the bill approved 24-15 by the House Ways and Means Committee on Tuesday. That legislation preserves the tax cuts for capital gains and dividends through 2010, The Associated Press reported.

Both the House and Senate extend many other tax cuts scheduled to expire soon. The list includes a business research and development credit, a low-income saver's credit, investment incentives for small businesses and a deduction for state and local sales taxes, the AP reported

Overall, the Senate bill includes many more tax breaks, including new deductions for charitable giving and private mortgage insurance premiums. It also tightened some tax shelters, curbed tax breaks for charitable giving and shaved tax breaks used by oil companies.

Senate tax writers would also prevent the alternative minimum tax from hitting millions more taxpayers next year. Lawmakers must act each year to prevent the levy, designed to prevent the wealthy from escaping taxation, from hitting less wealthy taxpayers. House tax writers left that provision out of its bill.

Next the Senate tax panel's bill will be sent to the full Senate for consideration, and likewise the House tax panel's bill will go to the floor of the House. After that, lawmakers from both bodies will convene to negotiate which elements should be included in the final piece of tax legislation that must be voted and approved by both the House and Senate, CNN/Money reported.

-- NYSSCPA.org News Staff

Posted on 11/16/05