MRAA continues to closely follow negotiations regarding the Fiscal Cliff. The Fiscal Cliff is defined as the combination of a 10-percent across the board cut of government spending and the expiration of the Bush era tax cuts. MRAA has lobbied in favor of balanced equitable solution and retention of the second home mortgage interest deduction, the state sales tax deduction option, and the repeal of the estate tax.
Negotiations are being conducted in secret with few even on the Hill knowing the details. However, MRAA remains optimistic that a resolution will be reached in the next couple of weeks. All fingers point to progress with key staff on the Senate Finance Committee and the House Ways and Means Committee working on narrow bills that can come to the floor for votes. Despite the public posturing by members of both political parties, the fact that very little has leaked out about the private conversations between the president and Speaker Boehner is a clear signal in DC that there may real movement behind the scenes.
What can we expect in the final deal? Based on speculation, it looks like individual tax rates for high incomes couple will rise. In addition, anticipate a limitation of deductions, such as mortgage interest deductions and charitable giving, for adjusted gross incomes above $300,000 (up from the published $250,000). Recently, the White House has put an overhaul of the corporate tax code on the table, such as new taxes on certain current tax-free bonds. Expect a tax reform bill in 2013 as part of the deal.
At a meeting on the Hill yesterday, staff said they are writing legislation to cut government spending and raise taxes in a two phase process. Phase one will include cuts and tax increases set to begin on December 31 and phase two will be cuts and tax increases that committees will look into during 2013. Cuts in government spending may not reach the mandated 10 percent contained in the sequestration bill, but some of the cuts will be major, especially in entitlements, such as raising the age to qualify for Medicare to the retirement age, $400 billion cuts in Health Care, requiring doctors to electronically file Medicare/Medicaid claims to streamline the process., etc.
The grand bargain between Congress and Obama faces a challenge of passage in the House, but most believe a new attitude of House freshmen has freed the Speaker to negotiate a compromise that would have been impossible last year.
