Taxes and the Fiscal Cliff – what’s up now?

Congress and the White House are still wrangling with the debt ceiling, raising taxes, cutting spending and a variety of issues collectively referred to as the Fiscal Cliff the nation reaches on January 1, 2013. Since it’s now 11 days away and many of those days are typically holidays, the issue is looming large. While there’s been some headway, it’s still clear the sides are far apart.

The White House has held firm that taxes on the rich have to rise but as a concession has agreed that lifting the debt ceiling may not need to be a unilateral power of the President.

The Republican leadership in Congress has conceded that taxes may have to go up for the wealthy but have pushed to have “wealthy” defined as those making $1,000,000 instead of $200,000 or $250,000. And they’re demanding much broader spending cuts than the White House has offered – In the Trillions instead of
the Billions over the next ten years.

And what’s the impact on you and me? Well, that still remains to be seen. It’s unlikely that any significant cuts will occur now. Both sides seem to want to reach a consensus that moves the heavy lifting further down the road, say a year or so. That’s not really a solution, but it allows for the perception of a resolution now and moves the target to a later date.

And Taxes – well, they’ll be going up no matter what. In the absence of real action (which appears likely at this point) many temporary tax cuts will expire and new taxes contained in legislation like ObamaCare will go into effect with the new year. So be prepared for lots of uncertainty and lots of acrimony. And most importantly, keep looking for ways to reduce taxable income and stay off the IRS radar.