Lame Duck Hunt 2012 -- Jan. 2 update
Well, it came down to the wire but Congress was finally able to come to an agreement that solves several tax issues and delays the automatic spending cuts known as sequestration. As with most compromises, both sides are less than happy but at least a deal was made and this chapter is in the books. Titled the ‘American Taxpayer Relief Act of 2012’, the new law
· raises about $600 billion in new revenue through several methods. Income tax rates for top earners (individuals who make over $400,000 and couples who make over $450,000) will rise to the pre-Bush level, 39.6 percent. Everyone else receives a permanent extension in current rates. The agreement also raises the rate at which capital gains are taxed from 15 to 20 percent for top earners (again using the $400,000 and $450,000 benchmarks). The new law also places limits on the tax benefits of high-income earners by returning to Clinton era policies. Finally, the tax rate on estates worth more than $5 million will increase from 35 percent to 40 percent.
· extends emergency unemployment benefits for the next year which will prevent 2 million people from losing their unemployment insurance.
· extends the expansion in the Child Tax Credit, the Earned Income Tax Credit, and extends the Opportunity Tax Credit. These three tax cuts overwhelmingly benefit low-income families and students. However, unlike the newly agreed upon income rates, which are permanent, these cuts are slated to last only five years.
· provides the so-called “doc-fix,” which prevents Medicare providers from seeing a major pay cut this year.
The agreement did not:
· address spending. In fact, it only postponed sequestration by two months, meaning that nearly every government program faces the possibility of massive budget cuts in early March.
· address the debt ceiling which is another battle that will be waged in early March.
For the White House’s summary of the law click here. You can find the entire text of the bill here. Finally, if you would like to see what the bill means for your taxes, check out the Tax Policy Center’s summary here.
Lame Duck Hunt 2012 -- Dec. 21 update
Last night an unexpected thing happened: Speaker Boehner’s so called ‘Plan B’ (see yesterday’s post for a brief overview of ‘Plan B’) didn’t even make it to a vote in the House of Representatives. Instead, Representative Boehner pulled his plan before a formal vote as it was clear that, even in the Republican controlled House, the bill would not pass. Rather than vote, the House retired for some Christmas vacation.
So where does this unexpected turn leave us now? Well, no one is entirely sure. However, one sure thing is that time is running short. Legislators have a little over a week to come to a deal in order to avoid the automatic spending cuts, known as sequestration, and the expiration of several tax cuts, all set to take place at the beginning of 2013. Keep an eye on this page as we move into 2013 for the latest developments in Washington as the fight over deficit reduction continues.
Lame Duck Hunt 2012 -- Dec. 20 update
The U. S. House of Representatives is expected to vote on Speaker John Boehner’s so called ‘Plan B’ proposal today. Even if ‘Plan B’ is approved by the House it will, by all accounts, fail to pass in the Senate and would surely be vetoed by the president if it made it to his desk. With that said, it is valuable to take a closer look at what ‘Plan B’ really entails as some of the provisions may be relevant as discussions move forward in the last days of 2012. And, upon closer inspection, ‘Plan B’ turns out to be a bad deal for most Coloradans.
‘Plan B’ would let the Bush era income tax rates expire for people earning more than $1 million annually, which is a fresh proposal from Speaker Boehner. However, ‘Plan B’ keeps several other major tax breaks for the wealthy intact while eliminating the expansions in the Earned Income Tax Credit and the Child Tax Credit passed in 2009. As Robert Greenstein, the president of the Center on Budget and Policy Priorities points out, this would mean that a single mother with two children would lose more than $1,500 of her Child Tax Credit from $1,725 down to $165.
To read a clear and comprehensive analysis of ‘Plan B’ and how it compares to the president’s current proposal check out CBPP’s paper written by Greenstein. Click here to access the paper.
Lame Duck Hunt 2012 -- Dec. 17 update
With only two weeks left until the end of the year, when automatic spending cuts are scheduled to begin as mandated in the Budget Control Act and a number of tax cuts expire, talks to avert the ‘fiscal cliff’ (click here to find out why it is actually more of a ‘fiscal slope’) have moved in a positive direction. Although several points of disagreement still remain between President Obama and the Democrats and Speaker of the House John Boehner and the Republicans, the latest proposals from each side show some willingness to compromise. Click here to see a New York Times breakdown of the most recent proposals.
Lame Duck Hunt 2012 -- Dec. 6 update
The fiscal cliff remains center stage in Washington as congressional leaders continue budget talks. Last week, President Obama proposed a $1.7 trillion budget with a balance of revenue increases and spending cuts. On Monday, House Republicans released a 10-year, $2.2 trillion counteroffer to the president’s plan.
The Republican Plan
There are several major components of the Republican budget. First, the plan calls for increasing the eligibility age for Medicare from 65 to 67 and reducing the cost-of-living increases in Social Security benefits. These cuts are in addition to $300 billion in cuts to non-health mandatory programs and $300 billion in cuts to discretionary programs. While the specific details of these cuts are vague, the proposal specifically calls for cuts in federal employee compensation and the Supplemental Nutrition Assistance Program (formerly known as the food stamps program).
The Republican proposal also includes $800 billion in higher tax revenue, while still keeping the Bush tax cuts in place for all taxpayers, including those in the top 2 percent, meaning couples making over $250,000 per year. Critics point out that $800 billion in increased tax revenue is inadequate and does not even cover the cost of extending the Bush tax cuts to the wealthiest Americans. The $800 billion is slated to come from the closure of an unidentified list of tax deductions.
Even though House Speaker John Boehner calls the GOP budget a “credible plan,” the Republican offer was promptly rejected by White House. President Obama spoke about the plan saying “unfortunately, (the Republican budget plan) is still out of balance.” With the rejection of this latest budget offer, talks remain at an apparent stalemate.