ongratulations to President Obama, 435 Representatives, 33 Senators, 11 governors, 6000 state legislators, and thousands of local city council reps, mayors, school boards who won this past Tuesday – there was a lot on the line.
Over the past two months NSCA has detailed specific issues that systems integrators should be concerned about, and now it’s time to get to work. As an advocate for the systems integration industry, NSCA will provide information on these key issues (taxes, healthcare, regulations, and labor to name a few) and make sure you are informed and engaged. Work must be done to work across party lines, create compromise and get our economy back on track.
This week is a quick overview and a look at what will be done over the next six weeks or so. As always, we suggest speaking with your tax professional in order to get the best advice for your own situation.
The looming fiscal cliff must be dealt with prior to December 31, 2012, or many business owners will see a major impact on their bottom line. Studies conducted by non-partisan groups, specifically the Tax Policy Center, estimate the expiring tax cuts would raise the average U.S. household’s tax burden by nearly $3,500.
Some might tell you to sell your business today, others might jokingly suggest to plan your death before the end of 2012, but what do the expiring tax cuts mean? How will Congress and the White House work together to create a compromise that will work for all?
As a reminder, the major tax cuts and incentives expiring at the end of the year include:
- Alternative Minimum Tax (AMT)
- Bonus Depreciation
- Capital Gains
- Estate Tax
- Income Tax
- Payroll Tax
First up, it appears there might be a short-term solution to extend the tax cuts through March, so Congress can work together to create an agreement to overhaul the tax code. President Obama has made his intentions clear to raise taxes on high-income earners ($200,000 for individuals and $250,000 for couples).
Both parties have stated they are interested in working together and finding a compromise somewhere in the middle. There’s a wide range of optimism, and all eyes are on Congress and the White House to see if they can work together. The next six weeks will have a huge impact over the next four years.
This short term solution will not necessarily address some of the tax cuts that need a bit more planning. For example, the Alternative Minimum Tax (AMT) rate has not been indexed for inflation for 2012 which could lead to many middle-income tax payers with an even heftier bill in 2013 (depending on your investments of course). Additionally, the payroll tax and capital gains rates can’t just be extended as there are immediate administrative concerns.
A report issued on Thursday by the Congressional Budget Office predicts the economy will fall into a recession if there is no deal struck over the next six weeks in Washington. The analysis states that the automatic tax increases and spending cuts (the fiscal cliff) would cut the deficit by more than $500 billion through September 2013, but it would cause the economy to shrink by .5 percent and costs millions of jobs. The long-term effect shows that by 2018, unemployment would be down to 5.5%.
Congress has a lot of work to do in order to reduce the deficit through a blend of tax cuts, increases, spending cuts and generating revenue. Which programs will be affected? How will it affect your business income? Your personal income?
Only time will tell, and NSCA will be here to inform you of these changes on a daily basis. Watch this blog, NSCA’s Legislative Alerts, and social media for the latest information.