Tax Tip of the Week
An Update on Capitol Hill
Congress Facing Slide Toward "Fiscal Cliff"
“It looks like Congress is serious about avoiding the scheduled expiration of trillions of dollars’ worth of tax cuts that some believe would risk pushing the tentative U.S. economy over a “fiscal cliff.”
The House Ways and Means Select Revenue Measures Subcommittee held a hearing Friday on various expiring and already-expired tax breaks.
“The days of simply rubber-stamping the extenders package are behind us,” said subcommittee chair Pat Tiberi, R-Ohio.
Donald B. Marron, Director of the Urban-Brookings Tax Policy Center, discussed the so-called “fiscal cliff” facing the country with the expiration of the traditional tax extenders along with the Bush tax cuts at the end of the year.
Marron noted that expiring and expired tax provisions make up most of the direct deficit reduction, including:
• $221 billion for the income, estate, and gift tax cuts originally set in motion in 2001 and 2003, plus the expired “patch” to the Alternative Minimum Tax
• $95 billion for the 2 percentage point cut in employee payroll taxes
• $65 billion for dozens of other temporary tax provisions
The hearing came a few weeks after a similar hearing at which a succession of lawmakers presented their views on which tax provisions were among their priorities. Friday’s hearing focused more on the principles of good tax policy, and the specific metrics against which Congress should test the merits of particular provisions.
In a speech Monday at the Bipartisan Policy Center, Senate Finance Committee Chair, Max Baucus, D-Montana, said he sees no chance for a major budget, tax and entitlement reform agreement before the November election. However, he signaled a strong interest in using the lame-duck session to lock Congress into an agreement to complete a major overhaul of the tax code and entitlements by mid-2013.
Baucus sees the virtue of extending some or all of the tax cuts through mid-2013, to give Congress and the administration sufficient time to reach an agreement on major tax and entitlement reform. The continued threat of a massive tax increase would be a strong incentive for Congress to address the government’s problems of overspending coupled with inadequate revenues, which together are driving up the deficit and debt.
We’ll keep you posted.
This week’s Tax Tip is courtesy of the Ohio Society of CPAs
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