The moment we've been waiting for - tax legislation has finally made its way through the Senate, but there is concern the chamber may have gone too far. Senate GOP leaders are attempting to attach an unrelated Medicare reimbursement measure and it is feared the measure will be unacceptable to President Clinton.
The tax bill, which is estimated to cost the government $245 billion in lost revenues over 10 years, will encompass these areas:
- A reform of the foreign sales corporation tax rules that excludes certain types of export and foreign sales income, so that the US will be in compliance with the World Trade Organization ruling.
- A $1 hike in the minimum wage.
- An increase in Section 179 expensing to $35,000
- An extension of the work opportunity tax credit through 6/30/04
- An increase to 70% in the tax deduction for business meals (80% for those affected by the DOT hours of service limitations)
- An option for accrual basis taxpayers to use the installment method of accounting
- The creation of 40 new renewal communities that would receive a capital gains tax rate of zero.
- An increase in the low income housing tax credit.
- A 100 percent tax deduction for the cost of medical insurance purchased by the self-employed.
- An above-the-line deduction for payment of medical insurance premiums for those not members in employer-sponsored medical plans.
- An above-the-line deduction for the cost of long-term care insurance.
- An increase in the allowable annual contributions to IRA accounts and 401(k) plans. IRA contributions will increase to $5,000 per year and there will be a $1,500 catch-up provision for those over age 50. Contributions to 401(k) and 457 plans will increase to $15,000 per year.
- A provision for after-tax contributions to Roth IRA accounts coupled with tax-free withdrawals at retirement.
It is expected that a final version of the bill will go to the floors of the House and Senate today for a vote.