You think your holiday to-do list is long? Look at what Congress must deal with now that its special bipartisan committee failed to reach a deficit reduction deal.
In case you haven't heard, the Joint Select Committee on Deficit reduction, popularly known as the supercommittee, was supposed to find at least $1.2 trillion in deficit reduction.
But the debate between the six Democrats and six Republicans over how to reach that dollar amount doomed the committee.
It also threw a major monkey wrench into plans by other senators and representatives who had hoped to have some pending legislation included in the supercommittee plan. That would have made some controversial measures easier to pass because the supercommittee bill could not be amended or filibustered into oblivion.
So now Congress must decide, and quickly, what to do about some tax provisions set to expire by the end of 2011.
Atop the list, or at least atop the president's list, is extension of the payroll tax holiday. This is the 2 percentage point cut to the payroll withholding tax that comes out of workers' paychecks to pay for Social Security. If Congress doesn't act, every worker's payday will be a bit smaller in 2012.
Then there are the tax extenders. These are the technically temporary tax laws that Congress usually extends (hence the name) at the end of each legislative session.
Among those expiring at the end of 2011 are several popular individual tax breaks:
- The itemized deduction for state and local sales taxes. This is particularly useful for taxpayers in states without income taxes.
- The above-the-line deduction for college tuition and fees, worth a possible $4,000.
- The educator's $250 deduction, also available to those who don't itemize, for out of pocket expenditures for classroom supplies.
- The option for older owners of traditional IRAs to rollover distributions to a charity.
Washington also must adjust the income exclusion limits on the alternative minimum tax to prevent more middle-class taxpayers from getting hit by this parallel tax.
And businesses will face some tax increases if expiring tax provisions that apply to them aren't extended.
They include a larger deduction for certain business equipment, bonus depreciation of certain business property, the reduction in the self-employment tax and a variety of business tax credits.
Will Congress be able to get to all this in the five weeks left when lawmakers return from their Thanksgiving break? Maybe.
But then the House and Senate might follow the supercommittee's example and decide to say to heck with it all.
At this point, anything that happens – or doesn't – on Capitol Hill wouldn't surprise me.
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