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GOP tax ‘plan B’ just for show?

By Kay Bell · Bankrate.com
Thursday, December 20, 2012
Posted: 2 pm ET

The Republican-controlled House is expected later Thursday to approve Speaker John Boehner's "plan B."

The main plank of the Ohio Republican's latest "fiscal cliff" proposal would make the Bush-era tax rates permanent for individuals making less than $1 million a year. That means folks making $999,999 or less would see a top income tax rate of 35 percent. Millionaires-plus would face a 39.6 percent tax rate.

Although Boehner may well have the votes to get his measure through the House, it won't pass in the Senate and President Barack Obama has vowed to veto it if it did somehow reach his desk.

So, once again, Congress is in the throes of political show.

But what is interesting about the GOP measure is what wasn't included.

The popular child tax credit would stay at $1,000 instead of dropping to $500, but the expansion of the tax break, passed as part of the 2009 stimulus package and which would allow some poorer families to receive more of a refund in connection with the credit, would not continue.

Neither would the expanded earned income tax credit, or EITC, for low-income workers or the president's pet education tax break, the American opportunity credit, which expanded the prior hope tax credit.

And the payroll tax holiday, which for the last two years has provided most workers with a 2 percent reduction in the Social Security taxes withheld from their paychecks, also would return to the 6.2 percent rate.

Of course, the president hasn't been pushing for the payroll tax cut in his counteroffers. So this provision looks pretty much line a goner.

But despite the impending House passage of Boehner's proposal, virtually all other tax measures remain in play as the fiscal cliff standoff continues.

Speculation is that Boehner simply wants a recorded vote so that his party can point to having taken some action, even though everyone knows it has no chance as is.

Once that's done and critics on both sides -- yes, some conservative Republicans are as upset as Democrats with plan B, albeit for very different reasons -- have their say, then a final deal can be struck.

But the big question remains, can it be done in time to put a bow on a tax and spending package by Christmas?

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