As Republican and Democratic lawmakers on Capitol Hill dig in their heels and scramble to work out a final compromise before the looming “fiscal cliff” at the end of December, Americans are left wondering if their taxes will go up in 2013 and whether they should heed the warning signs on the road to the cliff.
With only 10 legislative days and 29 days left in December before facing the “fiscal cliff”deadline, Republican and Democratic lawmakers in Washington are facing increased pressure to work out a viable solution to avoid Americans being faced with over $600 billion in automatic tax hikes and spending cuts that are set to kick in on Jan. 1st if no political compromise is reached.
On Friday, House Speaker John Boehner (R-Ohio) admitted that negotiations were at a stalemate after a week of budget talks and market volatility where headlines out of Washington D.C whipsawed the market in both directions, leaving many investors questioning the future steps that lawmakers may take in the days ahead to work out a grand compromise.
Speaker Boehner spoke in clear terms about how Republicans would like to solve the political impasse over the budget talks.
“During the campaign the President pledged that he would seek to address debt with the American people through a balanced approach of new revenues and spending cuts. So a day after the election I said the Republican majority would accept new revenues as part of a balanced approach that includes real spending cuts and reforms” he said.
Lower Tax Rates To Balance The Budget
Speaker Boehner (R-Ohio) is committed to the Republican ideology that taxes should be held lower to help the U.S. economy to recover even when the federal deficit is above $16 trillion and the Congressional Budget Office (CBO) estimated in June 2012 that the Bush tax cuts (EGTRRA and JGTRRA), which are poised to expire on December 31st, added about $1.6 trillion to the debt between 2001 and 2011, excluding interest.
Speaking before reporters last Friday, Speaker Boehner stood by Republican fiscal plans for lowering taxes and closing loopholes.
“Our original framework still stands. Instead of raising tax rates we can produce a similar amount of revenues by reforming the tax code by closing tax loopholes and lowering tax rates. That’s better for the economy” he said.
After the Bush tax cuts were adopted following the budget surplus under President Clinton’s presidency, Americans across the all income brackets received lower income tax rates, capital gains and dividend income taxes were lowered, and increases were given with the child tax credit.
On Friday House Minority Leader Nancy Pelosi (D-California) spoke before reporters and encouraged Republicans to support President Obama’s budget proposals that call for extending the middle income tax cut while allowing the tax cut to expire for the wealthiest 2% of Americans.
“As you know as we have been saying, and as the President said, he has his pen in hand and is ready to sign the middle income tax cut” she said.
Aware of the short deadline to work out a compromise, Minority Leader Pelosi offered Republicans a blueprint consisting of extending the middle income tax cut and revenue increases for the wealthiest 2%.
“We are calling upon the Republican leadership in the House to bring the legislation to the floor next week. We believe that not doing that will be holding the middle income tax cuts hostage to tax cuts for the rich which do not create jobs, increases the deficit, leaving mountains of debt for future generations.
Minority Leader Pelosi (D-California) said that if there is no announcement of a schedule for the bill of the middle income tax cuts by the Republican majority, “we will introduce a discharge petition and if we get 200 signatures, it will bring the bill automatically to the floor.”
According to the Congressional Budget Office, allowing the high-end Bush tax cuts to expire on schedule for the wealthiest 2% of Americans would raise $823 billion in revenue and save $127 billion in interest payments on the debt over the next ten years. Overall, this would mean $950 billion in ten-year deficit reduction.