Posted by: Heinz Brisske
On Friday afternoon, December 28, President Obama held a “fiscal cliff” meeting at the White House. It was attended by Senate Majority Leader Harry Reid (D-NV), Minority Leader Mitch McConnell (R-KY), Speaker of the House John Boehner (R-OH) and Minority Leader Nancy Pelosi (D-CA). The President issued a statement, indicating that, “As of today, I am still ready and willing to get a compromise package done. I still believe that reducing our deficit is the right thing to do for the long-term health of our economy and the confidence of our businesses. I remain committed to working towards that goal, whether it happens all at once or whether it happens in several different steps.”
It appears that the parties are now approximately $200 billion to $300 billion apart. Speaker Boehner stated, “I told the President on Monday these were my bottom lines. The President told me that his proposal of $1.2 trillion in new revenues and $850 billion in spending cuts was his bottom line.”
The Senate has specific procedures that are required in order to pass legislation that will be very difficult to accomplish before the end of the year. Reid stated that “I don’t know time-wise how it can happen.” He urged the House to pass the Senate Middle-Class Tax Cut Act (S. 3412), extending middle-class tax cuts and raising taxes for married persons with incomes over $250,000 and single persons with incomes over $200,000.
Minority Leader Mitch McConnell indicated that he was hopeful the White House would come up with a new proposal. He stated, “I told the President that we’re all happy to look at whatever he proposes. But the truth is, we’re coming up against a hard deadline here, and, as I said, this is a conversation we should have had months ago.”
As the negotiations drag on, it appears ever more likely that the estate and gift tax provisions currently in effect will simply be extended, at least temporarily. If that is the case, the applicable exclusion amount for estate and gift taxes would rise to $5.25 million in 2013, with an effective flat rate of 35%. The increase from $5.12 million is the result of a cost of living adjustment. Many Democrats are against such a high exclusion amount, since it benefits only the very wealthy. There has also been a substantial amount of talk about reducing the gift tax exclusion to its pre-2010 level of $1 million.