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The U.S. ‘fiscal cliff’

Automatic tax increases and draconian spending cuts will take effect at the end of 2012 unless Congress and President Obama can reach a deficit-reduction deal beforehand. If they fail, the government will go over the “fiscal cliff” — a $500 billion hit to the economy that analysts fear could push the country back into recession.

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obama-voices-support-for-approving-r74WASHINGTON — President Barack Obama on Wednesday signed into law the bill to avert the fiscal cliff.

The new law preserves the Bush-era tax cuts for individuals earning less than $400,000 and couples making less than $450,000 per year, and extends unemployment benefits.

The Senate passed the bill Tuesday morning and the House passed it Tuesday night.

The White House received a copy of the bill late Wednesday afternoon, a senior administration official told CNN. Obama, on vacation with his family in Hawaii, directed the bill be signed by autopen.

– CNN

WashingtonSEATTLE — Congress struck a deal to avoid the so-called ‘Fiscal Cliff’ Tuesday night, saving many from an increase in taxes.

But not all on Capitol Hill are happy. Including members from both sides of the aisle.

Other than the payroll tax, the deal keeps base tax rates the same for couples making less than $450,000 a year. Democrats wanted higher taxes and more tax hikes for upper income families, and most Republicans wanted more spending cuts.

Still, president Obama was happy to have passed some legislation to avoid huge cuts in programs and enormous, across-the-board tax increases.

“I believe that there’s further unnecessary spending in government that we can eliminate,” Obama said. “But we can’t simply cut our way to prosperity.”

Senator Richard Shelby (R-Alabama) said it’s unfortunate that the president wanted to talk about spending cuts only after a deal was passed.

“Now he’s wanting to talk about cutting spending,” Shelby said. “It’s kind of a joke.”

Another fight lies around the corner. Lawmakers have two months to vote to raise the debt ceiling, ir risk the government defaulting on its bills. Just like the fiscal cliff, the fight over the debt-ceiling will not be easy.

“The problem is we set up three more fiscal cliffs,” said  Representative Jim Moran (D-Virginia). “We’re gonna look back on this night and regret it.”

Rep. Adam Smith (D-Wash) voted against the deal. He said the low tax rates didn’t raise enough revenue, and the country was running deeper into debt.

“Ninety percent of the Bush tax cuts are now locked in permanently, so any effort to deal with the very large debt and deficit that we have going down the road here,” Smith said. “Revenue is pretty much off the table and we didn’t get much.”

Rep. Jim McDermott (D-Wash.) also voted against the deal.

Senator Maria Cantwell (D-Wash) said that the bill extended a sales-tax deduction for some people in Washington and six other states. Rep. Jaime Herrera (R-Wash.) voted for the bill, but said she “hoped Congress and the President would produce a solution” that better protected families.

“This compromise is a first step, and we must take a bigger second step that puts an end to out-of-control federal spending,” Herrera said. “The compromise keeps the sequester in place, which is a bi-partisan agreement to find more than $1 trillion in savings from every level of government.”

moneyWASHINGTON — The Washington state sales tax deduction will be extended for two years, Sen. Maria Cantwell, D-Wash., announced Tuesday. It was included in the ‘fiscal cliff’ measure that passed Congress Tuesday night and which President Obama said he will sign into law.

Without an extension, Washington residents would no longer be able to claim the deduction — and save money — when they file their 2012 federal tax returns.  Residents of other states that have state income taxes are allowed to deduct their state inoome taxes on their federal income tax returns, putting Washington and other states without state income taxes at a disadvantage.

Nearly 850,000 Washington residents took advantage of the state and local sales tax deduction in 2009, the most recent year of published IRS data, for an average tax savings of nearly $500 per filer, Cantwell noted.

She said the bill also would extend the Returning Heroes and Wounded Warriors Work Opportunity Tax Credit, the New Markets Tax Credit, the Low-Income Housing Tax Credit, the Research and Development Tax Credit and tax credits for clean energy production.

“This bill protects middle-class families from income taxes going up, and provides certainty for Washington state taxpayers and businesses by extending the state sales tax deduction for two years,” Cantwell said. “Extending the state sales tax deduction puts an average of $500 back in the pockets of 850,000 Washington tax filers.”

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Courtesy of CNN

(CNN) — Senate leaders and the White House struck a last-minute deal to try to avert the feared fiscal cliff Monday night, with Vice President Joe Biden headed to the Capitol Hill to pitch the plan to fellow Democrats.

But the House of Representatives went home long before midnight, meaning nothing will get through Congress before the combination of tax increases and spending cuts Congress has been scrambling to head off starts to kick in.

A source familiar with the deal told CNN that the Senate proposal would put off the cuts for two months and keep the expiring Bush-era tax cuts for individuals earning less than $400,000 or couples earning less than $450,000. Taxes on inherited estates over $5 million will go up, and that exemption will be indexed for inflation.

Nevertheless, he did not sound hopeful a deal was imminent, saying he expected to remain at the White House for New Year’s Eve while lawmakers used up every last second available to them.

“Keep the pressure on over the next 12 hours or so,” he urged supporters. “Let’s see if we can get this thing done.”

For the complete CNN story, go here.

Fiscal CliffWASHINGTON — The U.S. is being pushed to the edge of the fiscal cliff. And while negotiations are ongoing, no deal is certain two days before the new year.

No deal could mean a heavy burden on individuals and companies, especially around Washington state.

If a deal isn’t reached, most of the country’s workforce will see smaller paychecks. For those earning $30,000 a year, they will receive 50 dollars less per monthly paycheck. Any household income near $114,000 will lose about $190 a month.

Senator majority leader Harry Reid (D- Nevada) was pessimistic about a deal coming before Jan. 1.

“There’s still significant distance between the two sides,” Reid said.

On NBC’s Meet the Press, President Obama made a final pitch for his plan to preserve Bush-era tax cuts for everyone but the wealthiest Americans Sunday.

“Regardless of partisan differences, our top priority has to be to make sure that taxes on middle class families do not go up,” Obama said. “That would hurt our economy badly.”

A major sticking point is the annual income level at which tax increases should kick in. The threshold has wavered from $250,000 to as high as $1 million. Seattle accountant Dan Nicholson said whatever the number, a deal could mean less money coming in for a lot of Western Washington households.

“In the Seattle area, there’s a relatively large percentage of the population who make $250,000 or more,” Nicholson said. “The folks who work at Microsoft, Amazon, Starbucks. The namesake companies here.”

And since defense-spending is also on the chopping block, no deal could mean cuts at Joint Base Lewis-McChord.

“There were a lot of folks who were going away for their holiday break,” Nicholson said. “Not sure if they were going to come back and have a job.”

Nicholson advises his small business clients to be conservative with their money and try to wait out the storm. The Senate will re-convene Monday morning, with just over 10 hours until the deadline.

By Kate Burgess

chamberWASHINGTON — Talks over preventing the New Year’s tax hike on all but the wealthiest Americans hit a major setback Sunday when Republicans demanded — and Democrats rejected — a move to trim cost-of-living increases for Social Security recipients.

Negotiations continue, but the offer presented by aides to Republican Senate Minority Leader Mitch McConnell (R-Ky.), was swiftly rejected by Senate Majority Leader Harry Reid (D-Nev.)

It comes as lawmakers convene for a rare Sunday session of Congress, and McConnell said he telephoned Vice President Joe Biden to help broker a compromise.

For more on this LA Times story, click here.

 

ObamaWASHINGTON — A political summit on Friday at the White House left it to the Senate’s top Democrat and Republican to work out a possible compromise to avoid the fiscal cliff, participants said.

Senate Majority Leader Harry Reid, D-Nev., told reporters that the next 24 hours would be “very important” toward efforts to lessen the harshest impacts of the fiscal cliff, a combination of automatic tax hikes and deep spending cuts due to take effect at the start of the new year.

“Whatever we come up with is going to be imperfect. Some people aren’t going to like it, some people are going to like it less,” Reid said on the Senate floor after the meeting with President Barack Obama, other top congressional leaders and senior administration officials.

Reid’s Republican counterpart, Sen. Mitch McConnell of Kentucky, expressed hope that he and Reid could arrive at a proposal to present to their respective caucuses “as early as Sunday.”

Obama declared himself “modestly optimistic” that the Senate leaders can forge an agreement, but he warned that “nobody’s going to get 100% of what they want.”

In a statement to reporters, Obama also said that absent a deal, his latest proposal should be put to a vote, adding that he believed it would pass both the House and Senate with bipartisan support.

Congress has three days to come up with a solution before the end of 2012 brings the tax increases and spending cuts of the fiscal cliff.

– CNN

For the complete CNN story, go here.

cliffSEATTLE — It’s just a few days before the so-called ‘fiscal cliff’ hits. President Obama is cutting short his holiday vacation in Hawaii to return to Washington in hope of striking at least some kind of deal by the end of the year.

The president and House Speaker John Boehner remain at least $400 billion apart on a long-term deficit-cutting plan, which is needed to halt tax rate increases and draconian spending cuts that will automatically kick in Jan. 1 if Congress and the president do nothing.

Clearly, the president is frustrated that his reelection didn’t break the dynamic that has weighed on budget dealings with Congress for several years now.

“During the course of these negotiations, I offered to compromise with Republicans in Congress,” Obama said Friday during a news conference.  “I met them halfway on taxes, and I met them more than halfway on spending.”

Boehner, in a recorded message during the weekend, reiterated his stance that the president isn’t serious about reducing spending.

“The president’s solution of raising tax rates would still leave red ink for as far as the eye can see, and it would hurt jobs,” Boehner said.

Like much of the country, veteran lawmakers are dismayed by what seems like a perpetual impasse.

“It’s the first time that I feel it’s more likely that (we) will go over the cliff than not,” said retiring Sen. Joe Lieberman, I-Conn. “If we allow that to happen, it will be the most colossal, consequential act of congressional irresponsibility in a long time.”

Economists worry about effects of the protracted negotiations.

“A lot of people have been holding back on purchases,” financial adviser John Goodman said. “Businesses have been holding back on hiring, because they really do not know what is going to be happening on Jan. 1.”

Obama had hoped that the Christmas break would help ease tensions.

Thursday will tell, as the president returns to Washington, D.C., as well as the Senate, which is scheduled to be in session. Some observers believe at least some deal can be struck, but only of a limited nature.

“We are likely to see some last-minute and last-dash unsatisfactory deal thrown together that won’t do anything to solve the long-term problems but will get politicians out of the bind,” said Steve Hayes of the Weekly Standard magazine.

In a last-minute effort to help nudge negotiations, Seattle-based Starbucks is jumping into the fiscal cliff fray. CEO Howard Schultz is asking employees to write “Come Together” on drink order cups on Thursday and Friday in Starbucks’ cafes throughout the D.C. area.

“If people would get in the room and leave their ego behind and not be so skewed towards a party,” said Schultz, “we will have an agreement.”

Washington state’s congressional delegation will continue to play a key role in the fiscal cliff negotiations on both sides of the aisle. Democrat Patty Murray is the incoming chairwoman of the Senate Budget Committee, and Spokane Republican Cathy McMorris Rodgers is the chairwoman of the House Republican Caucus.

“We are committed to taking on the big issues and being a part of the solution,” said McMorris Rodgers.

obama8HONOLULU — President Barack Obama is ending his Hawaiian vacation Wednesday to make a late-hour bid to reach a fiscal-cliff deal before the year ends.

He will leave Honolulu Wednesday night and should be back in Washington on Thursday, the White House said. First lady Michelle Obama and their daughters will remain in Hawaii.

Obama and his family usually stay in Hawaii for Christmas and through the holiday week and New Year’s Day.

House and Senate members are expected to reconvene Thursday.

– CNN

To read the entire CNN report, click here.

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