Tax Bill Moves Forward: Will You Benefit?
May 11, 2006 — -- President Bush is expected to sign the controversial $70 billion dollar tax bill next week, after it passed the Senate today. The measure is a package of tax cuts that primarily favor upper-income Americans.
The centerpiece of the measure, which passed the Senate in a vote that went nearly right along party lines -- only three Republicans broke rank to vote against it and three Democrats voted for it, while one member of each party did not vote -- is a tax break on capital gains and investments.
Here's how the cuts break down: If you earn between $27,000 and $47,000 a year, which is middle income, your tax savings will average $20.
If you earn $47,000 to $82,000, you save $115.
Those with an average income of $82,000 and over will receive savings of roughly $2,099.
But the biggest savings go to the biggest earners. The top 1 percent of wage earners will receive a $13,849, and the top 0.1 percent will save an average of $82,000, which is why this bill was so controversial.
There's also an adjustment to the alternative minimum tax, or AMT, which will affect 15 million Americans by helping them avoid paying that tax for one year.
The AMT was designed more than 30 years ago to prevent wealthy taxpayers from avoiding paying taxes altogether by claiming a lot of deductions.
The problem is, Congress never addressed the definition of what wealthy is, so this tax bill modifies the AMT to protect some of those taxpayers.
The price tag on the AMT change alone is $31 billion over two years -- you can see why critics who opposed the bill say it favors the rich.
Those who favored the bill argued it would stimulate the economy, which would in turn help reduce the $300 billion deficit.
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