The Senate has passed a package extending the Bush-era tax rates for two years along with a 13-month unemployment extension.

The $858 billion bill, passed by a vote of 81-19, also temporarily patches the alternative minimum tax for two years to prevent it from spreading to millions more taxpayers, and cuts Social Security payroll taxes by 2 percentage points from 6.2 to 4.2 percent for a year. Under the bill, the estate tax would be reinstated at a rate of 35 percent for estates worth over $5 million for individuals and $10 million for couples.

“Preventing a tax increase is the best thing we can do for the economy right now,” said Senate Finance Committee ranking member Charles Grassley, R-Iowa, in a statement.  “It’s common sense that you don’t raise taxes in a recession, including on employers in small business where 70 percent of new jobs are created.”

Other provisions of the bill would extend the American Opportunity Tax Credit for college tuition, as well as the Child Tax Credit and the Earned Income Tax Credit. The bill also includes several business friendly provisions, including bonus depreciation rules that would allow businesses to write off 100 percent of their investments in purchasing plant and equipment and many other types of capital expenses for a year.

The bill will now go to the House, where it is expected to pass eventually as well, although some House Democrats plan to introduce amendments to increase the estate tax rate.

 

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