December 10, 2012 -
U.S. Representative Martha Roby (R-AL) today said she is ready to work through the Christmas holiday if that’s what is necessary to avert the “fiscal cliff.”
“This is a critical period for negotiations in Washington,” Rep. Roby said. “The ‘fiscal cliff’ has real-world consequences for this country and for families in Alabama’s 2nd Congressional District. I’m committed to working through the Christmas holiday if that’s what it takes to find a solution, and I encourage the House leadership to continue its ongoing dialogue with the White House and the Senate. I believe there is a way to find common ground without compromising our principles, and I am hopeful that a good agreement can be reached.”
The “fiscal cliff” refers to the expiration of lower tax rates for all Americans and the imposition of deep automatic spending cuts scheduled to kick in on January 1, 2013. Economists have warned that, left unresolved, this combination of policy changes could send the economy back into recession.
Negotiations between House Speaker John Boehner and President Barack Obama continued over the weekend. The President has insisted on certain tax rate increases while Republicans seek reforms to slow down entitlement spending.
“The federal government’s huge annual deficits are fueled by spending that is too high, not by taxes that are too low,” Rep Roby said. “I believe the House leadership understands that new taxes will hurt the economy and do little to bring down the deficit. I have also personally communicated to my colleagues the importance of avoiding deep automatic cuts to the military. There are other areas of the government more deserving of further cuts, and certainly reforming entitlement spending is the key to constraining future spending. I look forward to reviewing the product of these negotiations, but I will withhold judgment until my staff and I have the opportunity to carefully review the specifics of a written legislative proposal.”
The lower tax rates, first enacted during the Bush administration, were extended for two years in late 2010 and will expire on the last day of 2012.
During August 2011 negotiations to raise the debt ceiling and avoid a default, Congress passed the Budget Control Act of 2011, which included drastic spending cuts known as sequestration. The cuts, half of which will come from defense, were designed to be so drastic and so unacceptable that both sides would be motivated to hammer out an agreement to avoid their implementation. Roby opposed the measure and has warned that threatening deep, across-the-board military cuts is the wrong way to deal with a difficult budget situation.
The House has since passed legislation both extending the Bush tax cuts for all income levels as well and implementing more balanced and reasonable spending reductions that meet sensible budget priorities. The Senate has not acted on either bill.
Additional information on the impact of the “fiscal cliff”:
Unless averted, nearly every taxpayer in Alabama’s 2nd District would see higher income taxes and less take home pay if the nation goes over the “fiscal cliff.”
On average, American households would pay $3,500 more in taxes. Taxpayers making between $40,000 and $50,000 a year will pay, on average, about $1,700 more in taxes. Alabama’s median household income is about $41,400.
Tax cuts/credits set to expire:
- The Bush-era income tax cuts, including:
o Lowered individual income tax rates for all taxpaying Americans.
o An exclusion in the federal estate tax, or “death tax”
o Taxes on investment income, including the capital gains tax.
o Bonuses in the Child Tax Credit and the Dependent Care Tax Credit
o The household deduction that lessened the “marriage penalty”
- The 2009 stimulus tax breaks, including
o An expansion of the Earned Income Tax Credit, which currently offers relief to low-income workers
o The American Opportunity Tax credit, which helps middle class households pay for college tuition.
- The payroll tax, or tax on employees usually seen in a worker’s paycheck. A payroll tax “holiday” that temporarily reduced the rate from 6.2 percent to 4.2 percent is set to expire in January 2013.
The Alternative Minimum Tax. Originally meant for high-income earners but never adjusted for inflation, this tax could hit those making as little as $33,000 a year in 2012 if not fixed.
- “Extenders,” or tax credits and incentives offered to companies to encourage growth and competitiveness, which must be “extended” regularly lest they expire.
- The first of the “ObamaCare” taxes- a 3.8 percent surtax in investment income for households making $200,000 or more
Immediate spending cuts set to be triggered
- $50-55 billion across-the-board from the military budget ($500 billion over ten years)
- $25-30 billion in non-defense discretionary spending
- $14 billion from Medicare physician payments
- $39 billion from allowing unemployment insurance extensions to expire
