Even with the general elections of 2012 behind us, there is still much doubt in the air with regard to the future course of our federal government. For 2013, citizen advocates for all sorts of causes will be seeking clues to see if the incoming 113th Congress can put years of partisan gridlock behind it and do the people’s work.
The first chance for our federal leaders to strike a grand compromise comes with regard to the federal budget. As of the writing of this column, President Barack Obama and leaders from the Senate and the House of Representatives are desperately seeking strategies for averting the so-called “fiscal cliff.” As you probably know by now, the “fiscal cliff” refers to the effect of a number of laws which (if unchanged) could result in drastic tax increases (due to the expiration of Bush-era tax cuts) and a series of spending cuts mandated under the Budget Control Act of 2011. Absent immediate action, experts predict that our economy would be greatly impaired by this troublesome combination.
Given the growth of the federal budget deficit over the last decade, elected officials from both sides of the aisle have recognized that a combination of revenue enhancements and spending reductions is vital in order to bring the budget situation into balance.
The big debate has been with regard to the future of the Bush-era tax cuts. Democrats believe that lower rates should lapse for the wealthiest Americans -- those families earning more than $250,000 annually -- while maintaining the lower current tax rates for everyone else. On the other hand, Republicans want ALL taxpayers to maintain the existing, lower tax rates.
It seems obvious to me that our elected officials in Congress and the Executive Branch could start to make progress by focusing on the main aspect of the issue where all happen to agree ... namely by protecting current tax rates for the literally 98 percent of all Americans who do indeed make less than $250,000 per year. Absent this, a typical middle class family of four would see its taxes rise by $2,200 starting in 2013.
Back in July 2012, the U.S. Senate passed a bill that would do just that, and go a long way to reducing the budget deficit. The provisions of this legislation would generate an additional $1.16 trillion over ten years that would be applied to deficit reduction. Small businesses would also still be eligible for tax write-offs for new investments and tax credits for the hiring of new workers. In this manner, individual tax increases for the wealthiest citizens would not have an impact on future economic growth.
This legislation passed by the Senate represents the best chance for a compromise to avert the fiscal cliff. Even a conservative like Oklahoma's Senator Tom Coburn has said that he could support higher tax rates on upper incomes as part of a comprehensive plan to cut the federal deficit. Let's hope that elected officials from both parties don't continue to see compromise as a dirty word, and swiftly move to embrace a balanced solution for future fiscal stability.