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CRS: An Overview of Tax Provisions Expiring in 2012

Author: Margot L. Crandall-Hollick
April 17, 2012

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In this Congressional Research Service report, public finance analyst Margot L. Crandall-Hollick provides an overview of the expiring tax provisions as well as a discussion of the policy debates surrounding them.

A number of tax provisions either expired in 2011 or are scheduled to expire at the end of this
2012. These include the following:

• The Bush tax cuts, which reduced income taxes by reducing tax rates, reducing the marriage penalty, repealing limitations on personal exemptions and itemized deductions (PEP and Pease, respectively), expanding refundable credits, and modifying education tax incentives. The Bush tax cuts also reduced estate tax liabilities by increasing the amount of an estate exempt from taxation and by lowering the tax rate.

• The alternative minimum tax (AMT) patch, which, by increasing the amount of income that is exempt from the AMT and allowing certain personal credits against the AMT, prevents an estimated 26 million additional taxpayers from owing the AMT.

• The payroll tax cut, which reduced an employee's share of Social Security taxes by two percentage points.

• A variety of previously extended temporary tax provisions, commonly referred to as "tax extenders," which affect individuals, businesses, charitable giving, energy, community development, and disaster relief.

As Congress decides whether to extend these provisions, it may consider the estimated revenue losses associated with their extension. The Congressional Budget Office (CBO) estimated that extending these provisions through 2022, except for the payroll tax cut, which CBO assumes expires as scheduled at the end of 2012, would reduce revenues by $5.4 trillion between 2013 and 2022. Specifically, over this 10-year budgetary window extending the Bush tax cuts and extending the AMT patch would reduce revenues by $4.6 trillion, while extending the tax extenders would reduce revenues by $839 billion. The cost of extending the payroll tax cut for one year (2012) was estimated to be $114 billion over the 2012-2022 budgetary window.

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