In January, there were some tax law increases which I wrote about in this blog. Apparently, the Senate Democrats want some additional tax hikes. The earlier law increased the top income tax rate to 39.6%. It also increased the maximum tax rate on dividends and long-term capital gains to 20% and reinstated cut-backs in itemized deductions and personal exemptions.
According to a memo from Senator Patty Murray (D-WA), who is the chairman of the Senate Budget Committee, tax increases will be in their proposed budget plan. Here are some highlights of some of the proposed changes:
The President’s proposed budget would cap the value of itemized deductions at 28%. The effect of this is that taxpayers in the 33%, 35%, and 39.6% brackets would lose some of the value of their itemized deductions on things like mortgage interest and state and local taxes.
This limitation on itemized deductions would also apply to write-offs for IRA’s and self-employed health insurance premiums. It would also inhibit contributions to 401k’s and tax-free interest.
The Senate Democrats have stated they would use the increased revenue to reduce the deficit. However, as you might expect, the House Republicans are stating that they will not go along with the proposals. So it looks like there will be more fighting in Washington. Keep in mind that the last round of tax reform took almost two years to come up with a law.
In previous articles, I’ve written about how the IRS goes after bank accounts in foreign banks – specifically, Swiss bank accounts. The IRS is continuing to pursue that. A Federal District Court has approved an IRS summons to a Swiss bank known as Wegelin and Company. Pursuant to that Court Order, the IRS will get the names of account owners in that Swiss bank. Keep in mind there is an amnesty program which allows folks in that situation to come clean and pay a civil penalty in order to avoid criminal prosecution.