As of 6:10pm on New Years Eve, no votes are expected to avert the automatic tax hikes and spending cuts built into the Fiscal Cliff. The current deal in the works would result in $400,000 ($450,000 for married filing joint) being the new cutoff definition of “rich” and current tax rates extended for everyone else. It would also give estates a permanent $5 million exclusion with a 40% maximum tax rate, and a permanent patch to the Alternative Minimum Knowing it Tax. However, the deal also calls for an extension of unemployment benefits and no major entitlement reform. The result would be a short term resolution to the Fiscal Cliff, and a short term reintroduction to the debt cliff. As a result, passage of the newest deal is far from guaranteed. If we do see the deal, it will likely be a retroactive fix in 2013.
The deal on the table would also bring back limitations on itemized deductions and exemptions for families making $300,000 ($250,000 for single filers). There is optimism that the deal will eventually pass, however House Republicans signaled hesitation earlier this month to vote for any tax increases. Additionally, the President”s speech today on the Fiscal Cliff angered several prominent GOP members when he called for more taxes in the new year to replace spending cuts.