More On Tax Planningfrom The Advisor's Professional Library
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
- Charitable Giving Charitable giving can reduce your clients’ tax liabilities. However, the general and verification rules for the deduction of charitable gifts must be understood in order to take full tax advantage of such gifts.
Speaker of the House John Boehner’s Thursday call for the House to reconvene on Sunday raised the possibility that it would do something it has not done in over 40 years: take action on legislation on the last day of the year.
Reuters reported late Thursday that Boehner, R-Ohio, Senate Majority Leader Harry Reid, D-Nev., Senate Minority Leader Mitch McConnell, R-Ky., and House Minority Leader Nancy Pelosi, D-Calif., were scheduled to meet with Obama on Friday to discuss once again possible options to avoid the fiscal cliff—the double whammy of spending cuts and a return to higher tax rates that is scheduled to hit the American public if an agreement is not reached.
Boehner has summoned House members back for a 6:30 PM Sunday session, a rarity in itself. The House could then remain in session till January 2, according to a tweet sent by House Majority Leader Eric Cantor; that’s the last day of the current Congress. House members went on recess a week ago and have not yet returned.
Expectations were not high for the presidential meeting or for the House recall, and it is believed that lawmakers are expecting instead to put off dealing with the fiscal cliff till January. Market analysts also seemed geared toward a 2013 action, with Daiwa Securities economist Emily Nicols pointing out in a report that the House wasn’t coming back for another two days and "markets still expect a deal even if it does go into January." However, McConnell said Thursday that he had spoken with Obama and expected a new proposal.
The New York Times reported that the Senate, which reconvened Thursday, was the scene of numerous attacks on the Republican-led House by Reid, who repeatedly chastised Republicans for, among other things, failure to take up a Democrat-proposed bill to address the situation and failure of Boehner’s own “Plan B” legislation—not brought to a vote because of dissent within the Republican Party between Tea Party representatives and more moderate Republicans.
McConnell, for his part, insisted that the Senate should take up House bills already passed by the Republican majority. He dismissed on procedural grounds the Senate Democrat-proposed bill that preserves the Bush-era tax cuts on individuals making under $200,000 and couples making under $250,000 but allows them to expire on higher incomes. House Republicans have so far refused even to consider any bill that allows taxes to increase on anyone. They have also demanded that spending cuts be a part of any legislation.
The Congressional Budget Office (CBO) has predicted that in the absence of a deal to avert the fiscal cliff, the country would likely head back into recession in the first half of 2013—just when the economy has been showing signs of recovery. Other measures besides regular tax rates would also be affected without a deal; existing fixes to the alternative minimum tax (AMT) would expire, as would extended unemployment benefits, and military spending would be in for sizeable cuts.
Even Republicans do not seem optimistic about the possibility of a last-minute deal, however; Sen. Bob Corker, R-Tenn., characterized the Friday meeting between lawmakers and the president as something that "doesn't feel like anything that's very constructive is going to happen. It feels more like optics than anything that's real.” And Bloomberg reported that a lawmaker on the conference call notifying members about the Sunday session said that members agreed to the session even if they did nothing but wait for Senate action, since they were worried that Democrats were regarded by the public as being more proactive on budget talks.