Although the phrase primarily refers to the fact that tax rates on all Americans will return to the higher rates of the Bill Clinton era (including a rise in the highest tax rate from 35 percent to 39.6) on Jan. 1, there are several other factors in play. They include sequestration (automatic spending cuts in both domestic and defense programs) and the payroll tax cut, scheduled to rise from 4.2 percent to 6.2. The latest patch to the Alternative Minimum Tax (AMT) is also scheduled to end on December 31.
But for all intents and purposes, the focus is truly on tax rates and sequestration. President Obama and House Speaker John Boehner and their aides will be working intensely on that for the rest of the year. The president is content for the Bush tax cuts to expire on all but those making less than $250,000 at the end of the year. Congressional Republicans say they have a mandate to not allow that to happen.
On Wednesday the Greater Tampa Bay Chamber of Commerce weighed in, sending a letter to Senator Bill Nelson and the Tampa Bay area congressional delegation, informing them they should not allow tax breaks for anyone to expire at the end of the year, saying such a move would have "a chilling effect on economic growth that will jeopardize our recovery."
The letter says that while the Chamber believes that long-term fiscal issues should be addressed through comprehensive reform, "at this time with the impending 'fiscal cliff' we urge you to take bipartisan action now to avert these year-end tax increases and sequestration's across-the-board spending cuts."
The desire for Democrats and Republicans to work together in Washington is something that the public is seemingly crying out for — but there are still serious partisan divides on the surface as we approach the final five weeks of negotiating time.
Some Democrats, like Washington state U.S. Senator Patty Murray, says if need be, all of the tax cuts should expire at the end of the year and then retroactively reduced for those making less than $250,000 in 2013. Such a prospect would give Democrats leverage in the negotiations. Republicans counter that the U.S. economy isn't a game and brinksmanship should be discouraged.
Murray said this in July:
“If we can’t get a good deal, a balanced deal that calls on the wealthy to pay their fair share, then I will absolutely continue this debate into 2013 rather than lock in a long-term deal this year that throws middle-class families under the bus."
Meanwhile, here's the Chamber's letter in full:
Dear Senator Nelson,
The Greater Tampa Chamber of Commerce (GTCC) representing the interests of 1,300 member businesses and organizations in the Tampa Bay area, strongly encourages our Tampa Bay Area Congressional Delegation to lead a bipartisan effort to extend the tax provisions set to expire on December 31st and prevent the negative consequences from the mandatory sequestration provisions of the "Budget Control Act of 2011" (BCA) before the end of 2012.
The automatic tax increases will have a chilling effect on economic growth that will jeopardize our recovery. Sequestration will have significant impacts on many sectors of our economy including the military and defense industry. In Tampa Bay, MacDill Air Force Base accounts for an almost $5 billion positive economic impact and employs over 60,000 people both directly and indirectly. The BCA has already reduced the Pentagon's budget by $487 billion from FY 2012-21. The additional cuts that sequestration will impose on the military are nearly $500 billion over the next nine years, bringing total defense reductions under the BCA to about $1 trillion. Moreover, if the current tax provisions end, most tax brackets will rise, as will capital gains rates on long-term assets; dividends will be taxed as ordinary income, estate taxes will grow 20 percentage points to 55 percent, employees' payroll taxes will rise by one-third to 6.2 percent and 31 million additional taxpayers will pay alternative minimum taxes.
While the GTCC believes that long-term fiscal issues should be addressed through comprehensive reform, at this time with the impending "fiscal cliff" we urge you to take bipartisan action now to avert these year-end tax increases and sequestration's across-the-board spending cuts.
The GTCC strongly urges you to work with your colleagues to seek a bipartisan solution to these critical issues facing our economy.
Greater Tampa Chamber of Commerce, Chair Black & Black Consulting Services, President
Robert J. Rohrlack, Jr., President & CEO Greater Chamber of Commerce
Wendy Bowman Florida Blue
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