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Danger! ‘Fiscal cliff’ ahead

By Kay Bell · Bankrate.com
Friday, December 21, 2012
Posted: 1 pm ET

House Speaker John Boehner, R-Ohio, couldn't garner enough support among Republicans for his so-called Plan B, a continuation of most of the Bush-era tax cuts except for millionaires or richer, Thursday night.

Things are so bad in the divided Republican party that Boehner didn't even call a vote on the bill, which was the GOP's answer -- OK, some of the GOP's answer -- to fix the impending "fiscal cliff." I can't blame the speaker. Why embarrass yourself further by having it be defeated by your own party colleagues?

So what's next? In a brief statement after the House essentially closed shop for Christmas, Boehner said a fiscal cliff deal is now up to President Barack Obama and the Senate.

The big question is: What will Senate Minority Leader Mitch McConnell, R-Ky., do? He's been a pretty hard-line no-tax advocate himself. Of course, part of that is because he's probably facing a challenge for his Senate seat from more conservative Tea Party Republicans.

So getting a complete tax and spending deal now looks like it won't happen.

The best we taxpayers who are waiting on some tiny bit of tax clarity can hope for is that after the holiday break Capitol Hill and the White House agree to continue some of the tax measures that expired at the end of 2011 -- that's right, the so-called extenders such as the state and local sales tax itemized deduction and above-the-line adjustments for teacher expenses and tuition and fees that would apply to our 2012 tax returns have been dead for almost a year -- as well as fix the alternative minimum tax so that we can at least file our 1040s somewhat on time.

Then after we fall off the fiscal cliff on Jan. 1, 2013, members of the new 113th Congress can work on what tax laws they -- or should I say we citizens who elected them? -- want for next year.

Maybe once the current tax rates all go up all by themselves next month, the recalcitrant members of the GOP who wouldn't vote for any tax hikes will be OK with voting for tax cuts to bring at least some of the rates back down to 2012 levels.

But this is Congress we're talking about, so don't go placing any big bets on what might happen!

Happy Holidays and to all a good tax night.

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6 Comments
anthony
December 30, 2012 at 6:14 am

Maybe the politicians will forge a compromise in the last minute of this year. But there's still time to prevent a real catastrophe whose consequences would be felt in every economic sector not only in the US but in many other countries as well. I work in real estate in Canada and according to the analyses that I've recently read, the outlook for 2013 is more than optimistic as a result of stable economic conditions. But nothing is certain and much depends on the economic situation of our neighbor - the threats such as inflation in the US could put a halt to the positive development of real estate market in both Canada and the US which would consequently be felt all around the world.

Seth Prather
December 22, 2012 at 6:47 pm

Sure would like to know when the mortgage deduction turned into a loophole Ms Bell. I guess my children are loopholes as well since for now I can deduct a pittance for their upkeep and comfort. Perhaps charities and the church I contribute to are loopholes too. I love the mindset that a tax deduction cost the federal government. Armed guards at the local banks have been costing thief’s big money for years there’s no difference. Money; Ms Bell represents my time and labor, hence my freedom, given freely in exchange for what I deem to be a fair exchange. Whether I decide to take United States Dollars or Cookies in exchange for my labor when the government takes half of that arbitrated exchange it is theft. Perhaps one should expect pro-government drivel from a pilot fish or someone who makes a living off the blood of working people.

Jerome
December 22, 2012 at 4:05 pm

Ho-hum. It looks like we will be going over the fiscal cliff. My only comfort is that the poor and middle class will bear a greater share of the pain. It is their duty and true place in life to work hard so that I can have my special carried interest income taxed at the rate of capital gains. Maybe my representative in congress can get that rate lowered to 10% next year when negotiations begin with those foolish democrats. Merry Christmas to all!

The Economist Dude
December 22, 2012 at 12:57 pm

Obama and the state run media's obsession with tax rates, tax loopholes, and tax rate progressivity is just a smokescreen for the massive problem of out of control federal spending. Its interesting how Obama and the media manipulate the public mindset in what is a giant headfake distracting people from realizing that whatever tax burden is increased on whichever tax payers will do little or nothing to our massive sovereign debt burden and the increasing interest cost that it entails. This outrageous federal government spending will inevitably make everyone sustain a significantly lower standard of living irrespective of any agreement on tax rates or tax reform.