When people talk about the "Bush tax cuts," they typically focus on just one thing: the marginal tax rates for individual income that are scheduled to expire at the end of the year unless Congress acts.
But there are a host of other less-discussed tax changes that are also scheduled to happen on Dec. 31. These have all played a role in the talks between President Obama and House Speaker John Boehner. Here's the state of play for each of them:
1) Estate tax: The 2001 Bush tax cuts contained provisions which gradually lowered the estate tax rate and increased the personal exemption, which had been $1 million with a 55 percent top rate before then. Those tax breaks were scheduled to end in 2010, but legislators passed a two-year fix that lowered the tax rate even further, to 35 percent, and raised the exemption even higher, to $5 million. In the White House's latest "fiscal cliff" offer, Obama proposed returning to 2009 levels for the estate tax, with a $3.5 million exemption and a 45 percent rate. Boehner, by contrast wants to make the current treatment of the estate tax permanent, with a $5.1 million exemption and a 35 percent top rate.
2) Capital gains and dividends: The Bush law also cut taxes on these assets, which are now scheduled to rise from 15 percent to 20 percent. Obama wants to tax dividends as ordinary income for the highest earners—with a top rate as high as 39.6 percent for those above his current $400,000 threshold. He would let the tax on capital gains revert to the Clinton-era level of 20 percent for incomes above $250,000.* Boehner agree that the rate should rise for the wealthiest Americans, but he would tax them at 20 percent.
3) PEP and Pease: The Bush tax cuts also temporarily eliminated two provisions that restricted how much certain high-income Americans could write off through personal deductions and exemptions, known as the Pease limit and the Personal Exemption Phase-out (PEP). If those are reinstated, taxes on individuals above $177,550 in 2013 will see their deductions reduced under Pease, and single individual filers above $170,000 will have some or most of their tax exemptions eliminated. Obama would reinstate Pease and PEP for incomes above the threshold for marginal tax rates, which he's currently proposed to be $400,000. Boehner's Plan B would eliminate them permanently for all taxpayers.
4) Child Tax Credit and Earned Income Tax Credit: The 2001 Bush tax cuts expanded both of these provisions, which benefit lower-income Americans in the workforce and taxpayers with children. The 2009 stimulus made them even more generous: It raised the EITC wage subsidy for families with three or more children from 40 to 45 percent and made more families eligible for a higher Child Tax Credit. Obama wants to make these changes permanent at 2009 levels, whereas Boehner's Plan B would make them permanent at the less generous 2001 levels, raising taxes on some lower-income Americans.
5) Tax extenders: A host of temporary tax breaks, mostly benefiting businesses, are also scheduled to expire. Obama's latest offer proposed to make certain so-called extenders permanent, though it didn't seem to specify which ones. Boehner's Plan B similarly calls for making permanent certain tax extenders that give businesses greater ability to expense certain depreciable assets.
*Correction: The post has been corrected from an earlier version that said Obama would tax both capital gains and dividends as ordinary income.