WASHINGTON The top tax-cut priorities of the financial services industry were included in a $1.35 trillion package unveiled Friday by Senate Finance Committee Chairman Charles E. Grassley and the top Democrat on the panel, Sen. Max Baucus.
The measure, which features across-the-board individual income tax rate cuts and is being billed as a starting point for Senate debate, includes a gradual phaseout of estate taxes by 2011 and an expansion of retirement savings plans.
In the end, no one got everything he or she wanted, including me, Sen. Grassley, R-Iowa, said at a news conference after the deal was reached late Friday afternoon. He said the package would be opened to amendments when the panel takes it up Tuesday.
Topping the list for the industry is a provision to expand retirement funds that are generally sold and managed by financial institutions. The Grassley-Baucus proposal would, among other things, increase tax-deferred contributions to $15,000 from $10,500 for corporate 401(k) plans and to $5,000 from $2,000 for IRAs. It would also make it easier for small businesses to set up employee pension plans.
As for the estate tax repeal provisions, the industry was successful in ensuring that the stepped-up basis which allows the value of an estate to be taxed at the market value at the time the assets are inherited will be preserved during the phase-out period. However, the largest estates will remain subject to gift taxes, though the rates will be lowered.
The Grassley-Baucus package also would raise to $2,000 from $500 the amount that can be contributed to education savings accounts; give tax credits to lower-income people who contribute to retirement funds; double the standard deduction for married couples to provide relief from the marriage penalty; and expand the child tax credit to $1,000.
It does not include the establishment of special savings accounts for farmers and ranchers.