CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Obama's Fiscal Cliff Proposals Unacceptable To GOP

Obama's Fiscal Cliff Proposals Unacceptable To GOP

by Mike Godfrey, Tax-News.com, Washington

04 December 2012


United States House of Representatives Speaker John Boehner (R – Ohio) called President Barack Obama’s first proposal, involving both increased tax revenue and spending cuts to resolve the problems represented by the impending "fiscal cliff," as "not serious" and confirmed that little progress has yet been made.

It is recognized on all sides that, not only will a decision need to be taken by the end of this year on the more than USD600bn of tax increases and automatic spending cuts that are set to kick in on January next year if Congress takes no action, but also that a start should be made to reducing the US fiscal deficit.

While it is generally becoming accepted that the solution will contain elements of both the reduced spending wanted by Republicans and the increased tax revenue favored by Democrats, discussions appear, at the moment, to be revolving around finding a compromise that would increase revenue without the Bush tax rate hikes for taxpayers earning over USD250,000 that President Obama insists on, but Republicans adamantly oppose.

However, it was reported that the first compromise offer from the Administration, which was presented to Boehner on November 29 by Timothy Geithner, the Treasury Secretary, involved a plan to raise USD1.6 trillion of revenue (including USD1 trillion from high-income taxpayers), and only USD400bn in savings from Medicare and other social programs, over 10 years. The latter would be worked out next year, with no guarantees of success, while they could also be offset by other spending increases, including an extension of unemployment insurance.

The Democrat-led Senate already has an approved bill ready to send to the House, which would extend the Bush tax rate cuts, except for taxpayers earning over USD250,000, but the President also appears to want dividends earned by higher income individuals to be taxed as ordinary income and for the estate tax rate to be raised to a higher level on smaller inheritances than at present.

Republicans were undoubtedly disappointed with what, to them, represented a step back from trying to achieve a consensus. The Ranking Member of the Senate Finance Committee Orrin Hatch (R – Utah), giving the Republican weekly address on December 1, said that "the President has said he wants a so-called balanced approach to solve this crisis. But what he proposed this week was a classic bait and switch on the American people - a tax increase double the size of what he campaigned on, billions of dollars in new stimulus spending."

"This is not a game," Boehner stressed. “The president’s tax increase would be another crippling blow for [small businesses] while doing little to nothing to solve the bigger problem here, which is our national deficit and our national debt. This debt doesn’t exist because we don’t tax small businesses enough. It exists because Washington continues to spend too much."

"During the campaign, the president pledged to the American people that he would seek a balanced approach to addressing the debt – a combination of new revenues and spending cuts," he added. "The Republican majority would accept new revenue as part of a balanced approach that includes real spending cuts and reforms. Instead of raising tax rates, we can produce a similar amount of revenue [by] reforming the tax code to close loopholes and lower tax rates."

But the White House continues to believe that simply limiting high-income tax expenditures would not provide sufficient revenue to substitute for their tax rate increases - that it would not be possible to raise USD1 trillion or more over 10 years while keeping the top income tax rate at 35%.

"A careful look at the math of these types of caps and limits shows that, once one takes into account the reality of their impact on middle-class families and on charitable donations, plausible limits raise only a fraction of the USD1 trillion or more some have suggested," the White House concluded.

During a press briefing on November 29, White House Press Secretary Jay Carney repeated his assertion that President Obama "will not sign any legislation that extends the Bush-era tax cuts for top earners in this country," while the President himself, during his weekly address on December 1, continued to insist that, "right now, Congress can pass a law that would prevent a tax hike on the first USD250,000 of everybody’s income."

TAGS: individuals | Finance | tax | small business | business | law | legislation | tax rates | United States | dividends | individual income tax

To see today's news, click here.

 















Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »