An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”: S. 3412, S. 3413, H.R. 8

An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”: S. 3412, S. 3413, H.R. 8

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An Overview and Comparison of Proposals to
Extend the “Bush Tax Cuts”: S. 3412, S. 3413,
H.R. 8
Margot L. Crandall-Hollick
Analyst in Public Finance
July 30, 2012
Congressional Research Service
7-5700
www.crs.gov
R42622
CRS Report for Congress
Pr
epared for Members and Committees of Congress
c11173008

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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Contents
Introduction...................................................................................................................................... 1
Overview.......................................................................................................................................... 1
A Comparison of S. 3412, S. 3413, and H.R. 8 ............................................................................... 3
Budgetary Cost ................................................................................................................................ 4
Policy Debate................................................................................................................................. 16

Tables
Table 1. Side by Side Comparison of the Bush Tax Cut Proposals for 2013................................... 6
Table 2. Tax Brackets Under S. 3413, H.R. 8, and S. 3412 for Different Filing Statuses,
2013 ............................................................................................................................................ 15

Contacts
Author Contact Information........................................................................................................... 18

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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Introduction
Many of the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001
(EGTRRA; P.L. 107-16) and the Jobs Growth Tax Relief Reconciliation Act of 2003 (JGTRRA;
P.L. 108-27), henceforth referred to as the Bush tax cuts, are scheduled to expire at the end of
2012. Two bills introduced in the Senate—S. 3412, the Middle Class Tax Cut Act, offered by
Senator Reid and S. 3413, the Tax Hike Prevention Act, offered by Senator Hatch—propose to
extend some or all of these tax cuts for one year through the end of 2013.1 A bill introduced in the
House—H.R. 8, the Job Protection and Recession Prevention Act of 2012—is virtually identical
to S. 3413 except for its treatment of a business expensing provision. On July 25, 2012, the
Senate agreed to the Reid proposal by a vote of 51-48, while they rejected the Hatch proposal
(which was offered as amendment 2573 to the Reid proposal) by a vote of 45-54. Any further
action would be on a house-originated tax measure. 2 The House is expected to vote on H.R. 8
before the August recess.3
This report is organized to first provide an overview of the Bush tax cuts, followed by brief
summaries of S. 3412 and S. 3413, henceforth referred to as the Reid and Hatch proposals,
respectively. Revenue loss estimates of certain provisions of these bills are also included, as well
as a brief summary of H.R. 8, henceforth referred to as the Camp proposal. In addition, detailed
summary tables comparing the Reid and Hatch/Camp proposals—to each other and to current
law—are provided. Finally, this report concludes with a brief overview of the current policy
debate surrounding the partial or full extension of the Bush tax cuts.
Overview
The Bush tax cuts gradually reduced individual income and estate tax liabilities between 2002
and 2010.4 These tax cuts were extended for 2011 and 2012 by the Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312), henceforth referred to as
the 2010 Tax Act.
The Bush tax cuts lowered income taxes in a variety of ways, including by
• reducing marginal tax rates on ordinary income;

1 Conceptually S. 3413 is similar to S. 3401, but includes an additional provision extending Section 179 expensing for
one year. Similarly, S. 3412 is similar to S. 3393, but does not address the estate tax.
2 Under Article I, Section 7, clause 1 of the U.S. Constitution, known as “the Origination Clause,” the Senate may not
originate any measure that includes a provision for raising revenue. The House’s primary method for enforcement of
the Origination Clause is through a process known as “blue-slipping,” which returns to the Senate a measure that the
House has determined violates its prerogatives as defined by the Origination Clause. Alternately, on a number of
occasions the House has chosen to ignore a Senate-passed bill, and instead to take action on a House bill. For more
information, see CRS Report RL31399, The Origination Clause of the U.S. Constitution: Interpretation and
Enforcement, by James V. Saturno.
3 Sam Goldfarb, “Parties Hone Messages on Taxes,” CQ Weekly, July 30, 2012, http://www.cq.com/doc/weeklyreport-
4132597?wr=eFF6UlQqRXM3azIyb3JlTWgxUVozZw.
4 Other laws enacted during the Bush Administration accelerated the implementation of certain provisions of EGTRRA
and JGTRRA or modified provisions in these bills, including the Working Families Tax Relief Act of 2004 (WFTRA;
P.L. 108-311), The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA; P.L. 109-222) and the Emergency
Economic Stabilization Act of 2008 (EESA; P.L. 110-343).
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

• reducing long-term capital gains tax rates and the tax rate on dividends;
• reducing and then repealing income limitations for personal exemptions and
itemized deductions (often referred to as PEP and Pease, respectively);
• expanding tax credits, including the earned income tax credit (EITC), the child
tax credit, the adoption tax credit, and the dependent care tax credit;
• reducing the marriage penalty by expanding for married couples the standard
deduction, the 15% tax bracket and the income phase-out for the EITC; and
• modifying education tax incentives, including Coverdell education saving
accounts (ESAs), the student loan interest deduction, and the tax treatment of
certain scholarships and fellowships. The Bush tax cuts also created an exclusion
for employer-provided educational assistance.
The Bush tax cuts also gradually reduced the estate tax between 2002 and 2009, with a full repeal
of the estate tax in 2010.5 The estate tax is a tax on the estate of a decedent, levied against and
paid by the estate.6 Under EGTRRA, the amount of an estate which was exempt from taxation
gradually rose from $1 million per decedent in 2002 to $3.5 million per decedent in 2009, while
the top tax rate under the estate tax fell from 50% to 45% over the same time period. In 2010
there was no federal estate tax.
The 2010 Tax Act reinstated the estate tax, but raised the exemption level and lowered the tax rate
in comparison to the estate tax in effect in 2009. Specifically, the exemption amount in 2011 was
set at $5 million per decedent (adjusted for inflation, this amount equals $5,120,000 per decedent
in 2012) and the top tax rate was set at 35%. The estate tax is scheduled to increase in 2013 under
current law, with a $1 million per decedent exemption level and 55% top tax rate.
The Bush tax cuts also temporarily enacted the AMT patch which was then extended several
more times, most recently by the 2010 Tax Act which extended the AMT patch for one year—
2011. The Alternative Minimum Tax, or AMT, was designed to ensure that higher-income
taxpayers who owed little or no taxes under the regular income tax because they could claim tax
preferences would still pay some tax.7 Unlike the ordinary income tax however, key components
of the AMT are not indexed to inflation. This means that without Congressional action to adjust
the structure of the AMT, additional taxpayers will be subject to the AMT as a result of inflation.
The AMT patch is an increase in the amount of income exempt from the AMT. In 2011, the AMT-
exemption amounts were $74,450 for married individuals filing joint returns and $48,450 for
unmarried individuals. These exemption amounts revert to $45,000 for married individuals and
$33,750 for unmarried individuals in 2012. In addition, an AMT patch generally also includes a
provision which allows taxpayers to reduce their AMT by nonrefundable personal tax credits. In

5 For more information on the estate tax, see CRS Report 95-444, A History of Federal Estate, Gift, and Generation-
Skipping Taxes, by John R. Luckey and CRS Report RL30600, Estate and Gift Taxes: Economic Issues, by Donald J.
Marples and Jane G. Gravelle.
6 The federal estate and gift taxes are unified. This means that these taxes have the same rate structure. The federal gift
tax is imposed on lifetime gifts of property. For more information the relationship between the estate and gift taxes, see
CRS Report 95-416, Federal Estate, Gift, and Generation-Skipping Taxes: A Description of Current Law, by John R.
Luckey.
7 For more information on the AMT, see CRS Report RL30149, The Alternative Minimum Tax for Individuals, by
Steven Maguire.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

2012, since under current law there is no AMT patch, most nonrefundable personal credits are no
longer allowed against the AMT.
A Comparison of S. 3412, S. 3413, and H.R. 8
While there are many similarities between the Reid, Hatch, and Camp proposals, they also differ
in several key ways. (A complete comparison of the two bills is included in Table 1.)
Specifically:
• The Reid proposal would extend the Bush tax cuts for taxpayers with income
below $200,000 for single filers, $225,0000 for head of household filers, and
$250,000 for married joint filers for 2013.8 Taxpayers with income above these
thresholds would be subject to higher marginal tax rates—36% and 39.6%—than
are currently in effect. Both the Hatch and Camp proposals would extend all the
Bush tax cuts for 2013. For a detailed example of marginal tax rates under these
proposals, see Table 2.
• The Reid proposal would extend other temporary provisions for 2013 that were
originally included in the American Recovery and Reinvestment Act of 2009
(ARRA; P.L. 111-5) and subsequently extended by the 2010 Tax Act.
Specifically, the Reid proposal would extend ARRA provisions that expanded the
refundability of the child tax credit, reduced the marriage penalty of the EITC,
increased the EITC for families with three or more children, created a new higher
education tax credit—the American Opportunity Tax Credit, and disregarded tax
refunds and refundable credits in the administration of means-tested Federal
programs. Both the Hatch and Camp proposals would not extend these
provisions.
• The Reid proposal does not address the estate tax. Hence, under current law, the
estate tax would revert to a $1 million exemption level per decedent and a top tax
rate of 55%. Both the Hatch and Camp proposals would extend the 2010 Tax Act
provisions of the estate tax—a $5 million exemption level per decedent and top
tax rate of 35%—for 2013.
• The Reid proposal would extend the AMT patch for one year, 2012, while both
the Hatch and Camp proposals would extend the AMT patch for 2012 and 2013.
• The Reid proposal would extend enhanced Section 179 expensing amounts and
threshold limits—$250,000 and $800,000, respectively—for 2013. The Hatch
proposal would extend the 2010 and 2011 enhanced expensing amounts and
threshold limits—$500,000 and $2 million, respectively—for 2013. The Camp
proposal would extend the Section 179 expensing amounts and threshold limits—
$100,000 and $400,000, respectively—for 2013 (these levels are indexed for
inflation and are estimated to be $127,000 and $510,000, respectively in 2013).
• Finally, the Hatch proposal would require the Senate Finance Committee to
report tax reform legislation within 12 months with a top individual rate of 35%,
a top corporate rate of 25% and a permanent repeal of the AMT. The Camp

8 According to the legislative language, these thresholds will be indexed for inflation occurring since 2009.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

proposal does not include this requirement, but a companion bill H.R. 6169
would allow the House to consider tax reform legislation under expedited
procedures in the 113th Congress. The Reid proposal does not include the
requirement of the Hatch proposal.
To provide additional context for these proposals, Table 1 and Table 2 also include the tax law in
effect for 2012 (referred to as current policy) and the tax law scheduled to be in effect in 2013
(referred to as current law).
Budgetary Cost
The Joint Committee on Taxation (JCT) estimates the revenue losses from the Reid proposal (S.
3412) to be $249.66 billion over the 10-year budgetary window of 2013 through 2022 and the
revenue losses from the Camp proposal to be $403.15 billion over the same 10-year budgetary
window, while a complete estimate of the revenue losses from the Hatch proposal (S. 3413) is not
currently available.9 According to these estimates:
• Under the Reid proposal, the revenue losses from extending the EGTRRA and
JGTRRA individual income tax provisions for 2013 are estimated to be $129.53
billion over the 10-year budgetary window of 2013 through 2022, while the
equivalent revenue losses under the Hatch proposal are estimated to be $177.49
billion between 2013 through 2022. The equivalent revenue losses under the
Camp proposal are estimated to be $178.63 billion between 2013 through 2022.10
• Under the Reid proposal, the revenue losses from extending temporary tax cut
provisions included in ARRA for 2013 are estimated to be $27.22 billion over the
10-year budgetary window of 2013 through 2022. Both the Hatch and Camp
proposals do not extend these provisions.
• Under the Reid proposal, the revenue losses from extending enhanced Section
179 expensing amounts and threshold limits are estimated to be $878 million
over the 10-year budgetary window of 2013 through 2022, while the revenue
losses from the Hatch proposal regarding enhanced Section 179 expensing
amounts and threshold limits are not currently available. The revenue losses
under the Camp proposal are estimated to be $581 million between 2013 through
2022.
• Under the Reid proposal, the revenue losses from extending the AMT patch for
one year—2012—are estimated to be $92.04 billion over the 10-year budgetary
window of 2013 through 2022. An estimate of the revenue losses of the Hatch
proposal AMT patch provision—which would extend the AMT patch for 2012
and 2013—is currently unavailable. However, the revenue loss estimates from

9 Joint Committee on Taxation, Estimated Revenue Effects of the “Middle Class Tax Cut Act”, July 19, 2012, #12-2-
112 R3, Joint Committee on Taxation, Estimated Revenue Effects of a Possible Modification to the “Tax Relief Act of
2012,” July 18, 2012, #12-2-116 and Joint Committee on Taxation, Estimated Revenue Effects of H.R. 8, the “Job
Protection and Recession Prevention Act of 2012,”July 24, 2012, JCX-64-12.
10 The slight differences in the score arise from a $1.14 billion difference in how the extension of the current tax rates
on dividends is scored, not as a result of a policy difference between the Hatch and Camp proposals.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

the Camp proposal would result in an estimated $192.73 billion in revenue losses
over the 10-year budgetary window of 2013 through 2022.
• The Reid proposal does not address the estate tax and hence there are no revenue
losses under this proposal in comparison to current law, while the revenue losses
from the Hatch and Camp proposals—which extend the 2011 and 2012 estate tax
provisions for 2013—are estimated to be $31.21 billion over the 10-year
budgetary window of 2013 through 2022.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Table 1. Side by Side Comparison of the Bush Tax Cut Proposals for 2013
Current Policy
Current Law
In Effect in 2012
Hatch and Camp
In Effect in 2013
Provision
(Bush Tax Cuts in Effect)
Proposals for 2013
Reid Proposal for 2013
(Bush Tax Cuts Expired)
Bush Tax Cuts (EGTRRA and JGTRRA) and Applicable ARRA Modifications
10% Tax
This tax bracket applies to a portion Same as under the Scenario
Same as under the Scenario
This bracket expires and taxable
Bracket
of taxable income that was, prior to
“Current Policy.”
“Current Policy.”
income that was previously subject
the Bush Tax Cuts, subject to the
to the 10% rate will be subject to
15% bracket.
For more detail, see Table 2.
For more detail, see Table 2.
the 15% rate.
For more detail, see Table 2.
For more detail, see Table 2.
Tax Rates in
35% | 33% | 28% | 25%
Same as under the Scenario
The 28% and 25% brackets would
39.6% | 36% | 31% | 28%
Top Four Tax
“Current Policy.”
remain unchanged from “Current
Brackets
For more detail, see Table 2.
Policy.”
For more detail, see Table 2.
For more detail, see Table 2.
The 33% bracket would be in effect
for taxpayers with AGI under
$200,000 single filers, $225,000
head of household filers and
$250,000 married joint filers.a
Taxable income above this
threshold and below the limit for
the 36% threshold would be subject
to the 36% rate
Taxable income subject to 35% rate
would now be subject to 39.6% rate
For more detail, see Table 2.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Current Policy
Current Law
In Effect in 2012
Hatch and Camp
In Effect in 2013
Provision
(Bush Tax Cuts in Effect)
Proposals for 2013
Reid Proposal for 2013
(Bush Tax Cuts Expired)
Tax Rates on
The top tax rate for both long-term
Same as under the Scenario
The top tax rate for both long-term
The top tax rate for long-term
Capital Gains
capital gains and qualified dividends
“Current Policy.”
capital gains and qualified dividends
capital gains will rise to 20% and
and Dividends
is 15%.
remains 15% for taxpayers with AGI dividends will be taxed at ordinary
under the applicable threshold.
income tax rates.b
The top tax rate for both long-term
capital gains and qualified dividends
would rise to 20% for taxpayers
with AGI above the applicable
threshold.
The applicable threshold is
$200,000 for single filers, $225,000
for head of household filers, and
$250,000 for married joint filers. a
Limits on
There are no income limitations on
Same as under the Scenario
There will be no income limitations
The overall limitation on itemized
Itemized
the overall amount of itemized
“Current Policy.”
on the overall amount of itemized
deductions will be restored. For
Deductions
deductions a taxpayer can claim
deductions for taxpayers with AGI
higher income taxpayers, the total
(Pease)
(i.e., the Pease imitation is fully
below the applicable threshold.
amount of itemized deductions will
repealed).
be reduced by 3% of the amount by
The overall limitation on itemized
which the taxpayer’s AGI exceeds
deductions would be in effect for
an applicable threshold, adjusted
taxpayers with income above the
annually for inflation. The total
applicable AGI threshold (i.e., the
amount of itemized deductions will
Pease imitation is partially repealed). not be reduced by more than 80%.
The applicable threshold is
For 2013, the JCT estimates the
$200,000 and $250,000 for married
applicable Pease threshold to be
joint filers.a
$177,550.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Current Policy
Current Law
In Effect in 2012
Hatch and Camp
In Effect in 2013
Provision
(Bush Tax Cuts in Effect)
Proposals for 2013
Reid Proposal for 2013
(Bush Tax Cuts Expired)
Personal
There are no overall income
Same as under the Scenario
There will be no income limitations
The limit on personal exemptions
Exemptions
restrictions on the amount of
“Current Policy.”
on the overall amount of personal
will be restored. For higher income
Phase-Out
personal exemptions a taxpayer can
exemptions for taxpayers with AGI
taxpayers, the total amount of
(PEP)
claim (i.e., the PEP limitation is fully
below the applicable threshold.
exemptions that can be claimed will
repealed).
The overall limitation on personal
be reduced by 2% for each $2,500
exemptions would be in effect for
by which the taxpayer’s AGI
taxpayers with income above the
exceeds applicable thresholds,
applicable AGI threshold (i.e., the
adjusted annually for inflation.
PEP limitation is partially repealed).
For 2013, the JCT estimates the
The applicable threshold is set at
applicable Pease threshold to be
$200,000 for singles, $225,000 for
$177,550 for single filers, $221,950
head of household filers, and
for head of household filers and
$250,000 for married joint filers.a
$266,300 for married joint filers.
Child Tax
The child credit is $1,000 per
The proposal would extend the
Same as under the Scenario
The child credit will be $500 per
Credit
eligible child.
modifications made to the child tax
“Current Policy.” Both the Bush tax
eligible child.
credit by the Bush tax cuts. It would cuts and the ARRA modifications
The child tax credit is partially
not extend the ARRA modifications. would be extended.
The child tax credit will be non-
refundable using the earned income
JCT estimates that the refundability
refundable for most families (the
formula which is equal to 15% of a
threshold ($10,000 indexed for
earned income formula expires).
family’s earnings in excess of a
inflation), would be $13,350 in 2013.
refundability threshold of $10,000
(indexed for inflation annually).

ARRA Modifications
ARRA lowered the refundability
threshold used in the formula to
$3,000 (not indexed for inflation) for
2009 and 2010. This lower threshold
was extended for 2011 and 2012 by
P.L. 111-312.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Current Policy
Current Law
In Effect in 2012
Hatch and Camp
In Effect in 2013
Provision
(Bush Tax Cuts in Effect)
Proposals for 2013
Reid Proposal for 2013
(Bush Tax Cuts Expired)
Adoption Tax
Eligible taxpayers can claim two
Same as under the Scenario
Same as under the Scenario
The adoption tax credit will be
Benefits
adoption tax benefits, although the
“Current Policy.”
“Current Policy.”
available only for special needs
combined level of qualified expenses
adoptions. The exclusion for
is limited to $10,000 (indexed for
employer provided adoption
inflation). In 2012, this limit is
assistance will expire.
$12,650. Specifically, in 2012, a
taxpayer can either exclude from
The limit for the credit will be
their income up to $12,650 of
reduced to $6,000 (not indexed for
employer provided adoption
inflation).
assistance or claim a tax credit of up
The phase-out range for the credit
to $12,650, or a combination of
will be $75,000-$115,000 (not
both tax benefits as long as the
indexed for inflation).
combined level of qualified expenses
does not exceed $12,650. In 2012,
the combined limit for qualified
expenses is $12,650. Both the tax
credit and exclusion phase-out for
taxpayers with incomes between
$189,710-$229,710 in 2012
(indexed for annually for inflation).
Dependent
The dependent care credit is equal
Same as under the Scenario
Same as under the Scenario
The dependent care credit will be
Care Tax
to 35% of the first $3,000 of eligible
“Current Policy.”
“Current Policy.”
equal to 30% of the first $2,400 of
Credit
expenses for one qualifying
eligible expenses for one qualifying
individual ($6,000 of qualifying
individual ($4,800 for two or more
expenses for two or more eligible
qualifying individuals). The 30%
individuals). The 35% credit rate is
credit rate will be reduced for
reduced for incomes above
incomes above $10,000.
$15,000.
Standard
The deduction for married couples
Same as under the Scenario
Same as under the Scenario
The deduction for married couples
Deduction for
is 200% the deduction for singles
“Current Policy.”
“Current Policy.”
will be 167% the deduction for
Married
singles.
Couples

15% Bracket for The upper limit of this bracket is
Same as under the Scenario
Same as under the Scenario
The upper limit of this bracket will
Married
equal to 200% (i.e., double) the
“Current Policy.”
“Current Policy.”
be equal to 167% of the upper limit
Couples
upper limit for singles.
for singles.

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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Current Policy
Current Law
In Effect in 2012
Hatch and Camp
In Effect in 2013
Provision
(Bush Tax Cuts in Effect)
Proposals for 2013
Reid Proposal for 2013
(Bush Tax Cuts Expired)
Earned Income
The income level at which the EITC
The proposal would extend the
Same as under the Scenario
The higher phase-out level for
Tax Credit
begins to phase-out for married
modifications made to the child tax
“Current Law in 2012.” Both the
married taxpayers will expire and
Marriage
taxpayers in comparison to
credit by the Bush tax cuts. It would EGTRRA and ARRA modifications
their phase-out levels will be the
Penalty Relief
unmarried taxpayers was increased.
not extend the ARRA modifications. would be extended, hence the
same as for unmarried taxpayers.
Specifically, it was increased by
Hence, the phase-out level for
$5,000 increase in phase-out level
$3,000 under EGTRRA.
married taxpayers would be $3,000
would be extended. (This increase
more than the level for unmarried
in the phase-out level would be
ARRA Modifications
taxpayers. (This increase in the
indexed for inflation.)
This amount was increased to $5,000
phase-out level would be indexed
by ARRA (this amount was indexed for
for inflation.)
inflation). This modification was
extended for 2011 and 2012 by P.L.
111-312.
Employer
Up to $5,250 of qualifying employer
Same as under the Scenario
Same as under the Scenario
The provision will expire.
Provided
provided educational assistance is
“Current Policy.”
“Current Policy.”
Educational
excluded from income and hence
Assistance
not subject to taxation.
Student Loan
Up to $2,500 of student loan
Same as under the Scenario
Same as under the Scenario
The deduction can only be claimed
Interest
interest expenses can be deducted
“Current Policy.”
“Current Policy.”
by eligible taxpayers for the first 60
Deduction
from gross income (as an above-
months (5 years) of interest
the-line deduction). The amount

payments. In addition, the income
that can be deducted phases out
phase-out levels are reduced to
between $55,000-$70,000
$40,000-$55,000 ($60,000-$75,000
($110,000-$140,000 for married
for married joint filers), adjusted for
joint filers), adjusted for inflation.
inflation. The JCT estimates the
phase-out ranges will be $50,000-
$65,000 ($75,000-$90,000 for
married joint filers) in 2013.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Current Policy
Current Law
In Effect in 2012
Hatch and Camp
In Effect in 2013
Provision
(Bush Tax Cuts in Effect)
Proposals for 2013
Reid Proposal for 2013
(Bush Tax Cuts Expired)
Coverdells
Coverdell ESAs are modified in
Same as under the Scenario
Same as under the Scenario
These modifications expire, hence:
Education
several ways, including:
“Current Policy.”
“Current Policy.”
(1) The maximum contribution
Savings
(1) The maximum contribution
amount for a beneficiary will be
Accounts
amount for a beneficiary is $2,000
$500 per year
(ESAs)
per year
(2) Qualified expenses will be
(2) Qualified expenses include
limited to higher education
elementary and secondary school
expenses
expenses (kindergarten through 12th
(3) The phase-out range for married
grade), in addition to higher
taxpayers will be $150,000-
education expenses
$160,000, not indexed for inflation
(3) The phase-out range for married
(4) Contributions can be made up
taxpayers is $190,000-$220,000, not
until the beneficiary is 18 years old
indexed for inflation (double the
and all distributions must be made
phase-out range for singles)
when the beneficiary turns 30 for
(4) Age limitations are waived for
both non-special needs and special
special needs beneficiaries
needs beneficiaries
(5) Beneficiaries who use Coverdells
(5) If taxpayers claim education tax
can also claim education tax credits
credits when they take a Coverdell
without penalty (expenses paid for
distribution, their distribution will
with Coverdel funds cannot be
be subject to taxation
used to claim credits)
(6) Contributions made to a
(6) Contributions can be made to
Coverdell for a beneficiary will be
both a 529 plan and Coverdell for
subject to a 6% excise tax if
the same beneficiary without
contributions for the same
penalty.
beneficiary are made to a 529 plan
in the same year.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Current Policy
Current Law
In Effect in 2012
Hatch and Camp
In Effect in 2013
Provision
(Bush Tax Cuts in Effect)
Proposals for 2013
Reid Proposal for 2013
(Bush Tax Cuts Expired)
Tax Treatment
Students must general y pay taxes
Same as under the Scenario
Same as under the Scenario
Funding received from the National
of National
on any part of a scholarship,
“Current Policy.”
“Current Policy.”
Health Service Corps Scholarship
Health Service
fellowship, or tuition reduction that
Program and the F. Edward Hebert
Corps
can be attributed to teaching,
Armed Forces Health Professions
Scholarships
research, or other services that
Scholarship and Financial Assistance
and F. Edward
have been performed, are being
Program will be included as part of
Herbert Armed performed, or will be performed. A
income and hence subject to
Forces Health
temporary exception to this general
taxation.
Professions
rule is allowed for funding received
Scholarship and
from the National Health Service
Financial
Corps Scholarship Program and the
Assistance
F. Edward Hebert Armed Forces
Programs
Health Professions Scholarship and
Financial Assistance Program.
Estate Tax
Under EGTRRA the estate tax
Same as under the Scenario
Same as under the Scenario
The top exemption amount will fall
Exemption
gradually phased out such that in
“Current Policy. ” Specifically the
“Current Law.”
to $1 million per decedent (not
Level and Top
2009, the top exemption amount
exemption amount would be $5
indexed for inflation) and the top
Rate
was $3.5 million per decedent with
mil ion per decedent indexed for
tax rate will rise to 55%.
a 45% tax rate and there was no
inflation and the top tax rate would
estate tax in 2010.
be 35%.
Per legislative changes made by P.L.
111-312 for 2011 and 2012, the
exemption amount was equal to $5
mil ion per decedent indexed for
inflation and the top tax rate was
35%.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Current Policy
Current Law
In Effect in 2012
Hatch and Camp
In Effect in 2013
Provision
(Bush Tax Cuts in Effect)
Proposals for 2013
Reid Proposal for 2013
(Bush Tax Cuts Expired)
Other Provisions
AMT Patch
The AMT Patch expired at the end
The proposal reinstates the AMT
The proposal reinstates the AMT
NA
of 2011. Hence for the 2012 tax
Patch for 2012 and 2013.
Patch for 2012.
year, the AMT exemption amounts
were $33,750 for individuals and
For 2012, the exemption amounts
For 2012, the exemption amounts
$45,000 for married individuals in
would be $50,600 for individuals
would be $50,600 for individuals
2012.
and $78,750 for married joint filers. and $78,750 for married joint filers.
In 2012, under current law, most
For 2013, the respective exemption
Nonrefundable personal credit
nonrefundable personal credits will
amounts would be $51,150 and
would be allowed against the AMT
no longer be allowed against the
$79.850.
for 2012.
AMT.
Nonrefundable personal credit
would be allowed against the AMT
for 2012 and 2013.
EITC Expansion The EITC for families with three or
Same as under the Scenario
Same as under the Scenario
The 45% EITC for families with
(ARRA)
more children is 45% as a result of
“Current Law.”
“Current Policy.” The EITC
three or more children will expire.
ARRA modifications.
expansion for families with three or
more children would be extended.
Families with three or more
children will be eligible for the 40%
EITC (which is for families with two
or more children).
The American
The AOTC is in effect. The ARRA
Same as under the Scenario
Same as under the Scenario
The AOTC will expire. Taxpayers
Opportunity
temporarily replaced the permanent “Current Law.” The AOTC would
“Current Policy.” The AOTC would may be eligible for the Hope Credit.
Tax Credit
Hope Credit for higher education
expire.
be extended.
(AOTC)
expenses with the larger and
partially refundable American
Opportunity Tax Credit (AOTC),
and P.L. 111-312 extended this
credit for 2011 and 2012.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Current Policy
Current Law
In Effect in 2012
Hatch and Camp
In Effect in 2013
Provision
(Bush Tax Cuts in Effect)
Proposals for 2013
Reid Proposal for 2013
(Bush Tax Cuts Expired)
Section 179
Taxpayers may elect to deduct the
Hatch
Camp
The maximum amount that could be In 2013, the temporary expansions
Expensing
cost of a property placed in service
deducted would be set at $250,000,
to the Section 179 deduction will
for a given year instead of
The maximum
The maximum
with a $800,000 phase-out level.
expire and the parameters of the
depreciating those costs over time.
amount that
amount that
deduction will revert to their
The amount that can be deducted
could be
could be
permanent levels. Specifically, the
and the income level at which this
deducted would
deducted would
maximum amount that can be
benefit phases out have been
be set at
be set at
deducted will fal to $25,000, with a
increased temporarily several times.
$500,000, with a $100,000, with a
phase-out level of $200,000.
In 2012, the maximum amount that
$2 million
$400,000 phase-
can be deducted is $125,000, with a
phase-out level.
out level,
phase-out level of $500,000.
indexed for
inflation.
Disregard for
P.L. 111-312 included a provision
The refund and tax credit disregard
The refund and tax credit disregard
Refunds and tax credits will be
Means Tested
which disregarded all refundable tax
would expire.
would be extended.
included when determining eligibility
Programs
credits and refunds when
for certain means-tested programs.
determining eligibility for means
tested programs in 2012.
Sources: S. 3413 and S. 3412, The Joint Committee on Taxation. JCS-2-12, The Joint Committee on Taxation. JCX-63-12, and Table 1 in CRS Report R42485, An Overview
of Tax Provisions Expiring in 2012, by Margot L. Crandall-Hollick.
Notes: EGTRRA refers to the Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) and JGTRRA refers to the Jobs Growth Tax Relief Reconciliation
Act of 2003 (P.L. 108-27). There are other provisions addressed in the both the Hatch/Camp proposal and the Reid proposals specifically (1) EGTRRA provided employers
with a tax credit of up to $150,000 for acquiring, constructing, rehabilitating, or expanding property used for a child care facility. The Hatch/Camp and Reid proposals
extend this provision for 2013; (2) EGTRRA increased the small-issuer arbitrage rebate exception for school construction from $10 million to $15 million. The Hatch/Camp
and Reid proposals extend this $15 million level for 2013; (3) EGTRRA expanded the definition of private activity fog which tax-exempt bonds may be issued to include
bonds for qualified public educational facilities. The Hatch/Camp and Reid proposals extend the allowance to issue tax-exempt private bonds for public school facilities for
2013; (4) EGTRRA allowed an election in which Alaska Native Settlement trusts can pay a lower tax rate than generally applies to trusts. The Hatch/Camp and Reid
proposals extend the this tax relief for 2013.
NA = not applicable.
a. These applicable thresholds are indexed for inflation occurring since 2009.
b. In addition, a scheduled 3.8% surtax on investment income for taxpayers with income above the $200,000/$250,000 married joint filer threshold, included as part of
the Affordable Care Act, is scheduled to go into effect in 2013.

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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

Table 2. Tax Brackets Under S. 3413, H.R. 8, and S. 3412
for Different Filing Statuses, 2013
Hatch Proposal-S. 3413 &
Camp Proposal-H.R.8
Current Law
Reid Proposal-S. 3412
(Current Policy)
Single Filers
Taxable Income
Rate
Taxable Income
Rate
Taxable Income
Rate
(over-but not over)
(over-but not over)
(over-but not over)
$0-$8,900 10%
$0-$8,900 10%
$0-$36,150 15%
$8,900-$36,150 15%
$8,900-$36,150 15%
$36,150-$87,550 25% $36,150-$87,550 28% $36,150-$87,550 25%
$87,550-$182,600 28% $87,550-$182,600 31% $87,550-$182,600 28%
$182,600-$202.900a 33%
$182,600-$397,000 33% $182,600-$397,000 36% $202,900a-$397,000 36%
$397,000- 35% $397,000 39.6% $397,000 39.6%
Head of Household Filers
Taxable Income
Rate
Taxable Income
Rate
Taxable Income
Rate
(over-but not over)
(over-but not over)
(over-but not over)
$0-$12,700 10%
$0-$12,700 10%
$0-$48,400 15%
$12,700-$48,400 15%
$12,700-$48,400 15%
$48,400-$125,000 25% $48,400-$125,000 28% $48,400-$125,000 25%
$125,000-$202,450 28% $125,000-$202,450 31% $125,000-$202,450 28%
$202,450-$224,550b 33%
$202,450-$397,000 33% $202,450-$397,000 36% $224,550b-$397,000 36%
$397,000- 35% $397,000 39.6% $397,000 39.6%
Married Joint Filers
Taxable Income
Rate
Taxable Income
Rate
Taxable Income
Rate
(over-but not over)
(over-but not over)
(over-but not over)
$0-$17,800 10%
$0-$17,800 10%
$0-$63,500c 15%
$17,800-$72,300c 15%
$17,800-$72,300c 15%
$72,300-$145,900 25% $60,350-$145,900 28% $72,300-$145,900 25%
$145,900-$222,300 28% $145,900-$222,300 31% $145,900-$222,300 28%
$222,300-$246,200d 33%
$222,300-$397,000 33% $222,300-$397,000 36% $246,200d-$397,000 36%
$397,000- 35% $397,000 39.6% $397,000 39.6%
Source: Joint Committee on Taxation, Description of Revenue Provisions Contained In The President’s Fiscal Year
2013 Budget Proposal, June 18, 2012, JCS-2-12, Tables 5 & 6.
Notes: These brackets are based on estimates of the individual income rate structure in 2013 from the Joint
Committee on Taxation. The actual brackets for 2013 may differ.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

a. In 2013, the 33% bracket in effect in 2012 is split into the 33% and 36% bracket with single filers with
taxable income less than $202,900 ($200,000 of AGI minus the basic standard deduction and one personal
exemption, adjusted for inflation), subject to the 33% rate.
b. In 2013, the 33% bracket in effect in 2012 is split into the 33% and 36% bracket. The starting point of the
36% bracket is set at the midpoint of the starting point for single filers and married joint filers, rounded
down to the nearest $50.
c. For married joint filers, the top of the 15% bracket is scheduled to be equal to 167% of the top of the 15%
bracket for singles upon the extension of the Bush Tax Cuts. The extension of the Bush Tax Cuts would
extend the provision whereby the 15% bracket for married joint filers is 200% the bracket for singles.
d. In 2013, the 33% bracket in effect in 2012 is split into the 33% and 36% bracket with married joint filers
with taxable income less than $246,200 ($250,000 of AGI minus the basic standard deduction and two
personal exemptions, adjusted for inflation), subject to the 33% rate.
Policy Debate11
Supporters and opponents of the Bush tax cuts generally evaluate the Bush tax cuts from different
perspectives. Supporters of the tax cuts stress both their long-term and short-term economic
benefits. Opponents often emphasize that the tax cuts are costly in terms of reduced revenues and
that the benefits of this policy disproportionally accrue to the highest income taxpayers.
When the Bush tax cuts were originally proposed, proponents stressed that by reducing marginal
tax rates, this policy would lessen some of the distortions taxes had on work, saving, and
investment, ultimately boosting long-term growth. For example, by reducing marginal tax rates,
individuals would have more take-home pay, theoretically incentivizing them to work more.
Advocates also highlighted that lower marginal rates on investment income—capital gains and
dividends—would encourage increased investment, although analysis indicates capital gains may
have little or no effect on saving.12 Ultimately, this increased economic activity would boost long-
term economic growth. The results of many economic studies, have shown that tax cuts generally
do affect growth (and components of growth).13 They have also generally shown, however, that
the impact of tax cuts on growth is small in relation to the foregone revenue resulting from the
cut.14

11 A more detailed overview of the policy debate, including on provisions not addressed in this paper, like the AMT,
can be found in CRS Report R42485, An Overview of Tax Provisions Expiring in 2012, by Margot L. Crandall-Hollick.
12 For more information on the economic impact of capital gains taxation, including a distribution analysis of
beneficiaries of lower capital gains rates, see CRS Report R40411, The Economic Effects of Capital Gains Taxation, by
Thomas L. Hungerford.
13 In an analysis of the budgetary cost of the Bush tax cuts, CBO stated: “The policies [Bush tax cuts] undoubtedly
exerted at least some influence on the economy…Those economic feedbacks on today’s budget, however, are likely to
be modest.” For more information, see Congressional Budget Office, Letter to the Honorable John M. Spratt, Jr., July
20, 2007, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/83xx/doc8337/07-20-egtrra-jgtrra_and_deficits.pdf.
14 Lowering marginal tax rates would theoretically increase the amount taxpayers work and so would theoretically
increase their income (all else being equal). The sensitivity of income to changes in marginal tax rates is referred to as
elasticity. An elasticity less than one implies that changes in taxpayers’ income were proportionally less than the
changes in the tax rate, while an elasticity greater than one implies that income gains are proportionally larger than the
tax cut. A recent review of other studies found that the elasticity of income to tax rate changes was between 0.12 to
0.40. Since the resulting increase in income is proportionally smaller than the cut in marginal rates, government
revenues will fall as a result of the cut. See Emmanuel Saez, Joel Slemrod, and Seth Giertz, “The Elasticity of Taxable
Income with Respect to Marginal Tax Rates: A Critical Review,” Journal of Economic Literature, vol. 50, no. 1
(2012), pp. 42. Similarly, CBO found that a 10% tax rate cut would offset between 5%-32% of the cost of cut in terms
of revenue losses over the second 5 years of a year budgetary window. For more information, see Congressional
(continued...)
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

When the Bush tax cuts were being considered by Congress in 2001, the economy had slipped
into a recession. Tax-cut advocates were highlighting the short-term stimulative benefits of the
tax cuts. The scheduled expiration of the Bush tax cuts at the end of 2012 is also occurring at a
time of relatively weak economic growth and high unemployment. Recent estimates by CBO
have concluded that the extension of the Bush tax cuts would have a limited stimulative benefit
on the economy in 2013—estimating that every $1 dollar of Bush tax cuts would result in 10 to
60 cents of additional GDP.15 Yet, while the Bush tax cuts may not have been an effective short-
term stimulus in response to a recession, some economists warn that allowing these tax cuts to
expire in 2013, at the same time as a scheduled fiscal contraction, may have a negative effect on
the economy.16
Opponents of extending all the Bush tax cuts highlight both their high cost as well as the fact that
most of the benefits go to upper-income taxpayers. Recent estimates by CBO indicate that the
Bush tax cuts, whose costs were not offset, increased the deficit by $1.75 trillion over the past 10
years (2002-2011).17 The 2010 Tax Act’s two-year extension of the income and estate tax
provisions of the Bush tax cuts (including the ARRA modifications which are also proposed to be
extended by the Reid proposal) reduced revenues by $475.79 billion over a 10-year budgetary
window (2011-2020).18 Of these revenue losses, $363.55 billion is attributable to the extension of
the income tax provisions of EGTRRA and JGTRRA. However, the revenue losses of the
extending the Bush tax cuts for all but high income taxpayers is significant. The Reid and Hatch
proposals to extend the EGTRRA and JGTRRA individual income tax provisions for one year—
2013—would reduce revenues by $129.53 billion and $177.46 billion respectively for the 10-year
budgetary window from 2013 through 2022.19 Hence, extending the Bush tax cuts for taxpayers
with income below $200,000 for single filers and $250,000 for married joint filers would cost
approximately 72% of extending the tax cuts for all taxpayers.
While the expiration of the Bush tax cuts for higher income taxpayer may not yield significant
cost savings in comparison to an extension for all taxpayers, critics still posit that it will help

(...continued)
Budget Office, Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates, Economic and
Budget Issue Brief, December 1, 2005, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/69xx/doc6908/12-01-
10percenttaxcut.pdf. In so far as tax cuts are deficit-financed, they may actually negatively impact growth. For
example, the Joint Committee on Taxation, in modeling the economic effects of reducing individual and corporate tax
rates, found that “Growth eventually become(s) negative without offsetting fiscal policy…because accumulating
Federal government debt crowds out private investment.” Joint Committee on Taxation, Macroeconomic Analysis of
Various Proposals to Provide $500 Billion in Tax Relief, JCX-4-05, March 1, 2005, p. 2.
15 See Table 1, CBO, Policies for Increasing Economic Growth and Employment in 2012 and 2013, November 2011,
http://www.cbo.gov/publication/42717. Of the policies examined, tax cuts were one of the least stimulative.
16 Mark Zandi, chief economist at Moody’s Analytics, testified to the Joint Economic Committee that the scheduled
spending cuts included in the Budget Control Act which go into effect in 2013 and combined expiration of extended
unemployment insurance benefits, the payroll tax cuts, and the Bush tax cuts in 2013 will reduce real GDP growth by
nearly 3 percentage points in 2013. See http://jec.senate.gov/public//index.cfm?a=Files.Serve&File_id=df8f2728-94fa-
4339-992a-a9b8d2505fc2.
17 CBO, Change in CBO’s Baseline Projection of the Surplus Since January 2001, May 12, 2011, http://www.cbo.gov/
sites/default/files/cbofiles/ftpdocs/121xx/doc12187/changesbaselineprojections.pdf.
18 Joint Committee on Taxation, Estimated Budget Effects of the “Tax Relief Unemployment Insurance Reauthorization
and Job Creation Act of 2010”, Scheduled for Consideration by the United States Senate, December 10, 2010, JCX-54-
10.
19 Joint Committee on Taxation, Estimated Revenue Effects of the “Middle Class Tax Cut Act”, July 19, 2012, #12-2-
112 R3 and Joint Committee on Taxation, Estimated Revenue Effects of a Possible Modification to the “Tax Relief Act
of 2012”, July 18, 2012, #12-2-116.
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An Overview and Comparison of Proposals to Extend the “Bush Tax Cuts”

lessen inequity in the tax code that resulted from the Bush tax cuts. According to estimates
examining tax burdens in 2010, the Bush tax cuts resulted in the lowest 20% of taxpayers seeing
their after-tax income rise by 0.5%, while the top 20% saw their after-tax incomes rise by 4.9%
and the top 1% saw their income rise by 6.6%, a distribution that critics highlight benefits
wealthier taxpayers.20 While comparative estimates of the distributional impact of the Reid, Hatch
and Camp proposals are currently unavailable, the Reid proposal may reduce some of the gains in
after-tax income for upper income taxpayers that resulted from the Bush tax cuts and which
would continue under the Hatch and Camp proposals.21
The distributional impact of the Bush tax cuts—and hence the impact of a full extension as
proposed by Senator Hatch and Chairman Camp—may be relevant to policy makers if they are
concerned with growing income inequality in the United States.22 A recent CBO report
highlighted that while the main driver of increasing after-tax income inequality was the increasing
concentration of pre-tax income among the wealthiest Americans, government transfers and
federal tax policy also contributed to the growth of after-tax income inequality.23 As the CBO
report indicated, the equalizing impact of taxes depends on their progressivity,24 with increasing
progressivity reducing income inequality (holding the size of tax receipts constant).25 The Bush
tax cuts overall reduced the progressivity of federal income taxes26 and hence were a factor in
increases in income inequality in the United States, according to CBO. In this case, allowing the
Bush tax cuts to expire for upper income earners would result in a more progressive tax code in
comparison to an extension for all taxpayers.

Author Contact Information

Margot L. Crandall-Hollick

Analyst in Public Finance
mcrandallhollick@crs.loc.gov, 7-7582

20 Tax Policy Center. These estimates include the impact of the AMT-patch and the 2008 EESA recovery payments.
Table T10-0232.
21 However certain provisions of the Bush tax cuts which tend to benefit upper-income taxpayers like the preferential
tax rates on capital gains and dividends do not expire under the Reid proposal. Instead of the marginal tax rates for both
dividend and capital gains rise to 20% for upper income taxpayers (if the Bush tax cuts expired, dividends would be
taxed as ordinary income). For more information on the distributional impact of the preferential capital gains tax rates,
see CRS Report R40411, The Economic Effects of Capital Gains Taxation, by Thomas L. Hungerford.
22 For example see, Emmanuel Saez, “Striking It Richer: The Evolution of Top Income in the United States (Updated
with 2009 and 2010 estimates),” March 2, 2012, http://emlab.berkeley.edu/~saez/saez-UStopincomes-2010.pdf. In
addition, see CRS Report R42400, The U.S. Income Distribution and Mobility: Trends and International Comparisons,
by Linda Levine.
23 CBO, Trends in the Distribution of Household Income Between 1979 and 2007, October. 2011.
24 The current federal income tax is progressive meaning that taxes as a share of income increases as income levels of
increase.
25 CBO, Trends in the Distribution of Household Income Between 1979 and 2007, October. 2011, p. 20.
26 CBO, Trends in the Distribution of Household Income Between 1979 and 2007, October 2011, p. 27.
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