If the lawmakers from Congress and the White House don’t come up with a compromise soon, millions of families and businesses would have to pay bigger taxes in 2013. More than 70 tax breaks enjoyed by businesses and individuals have already expired in 2011. If Congress doesn’t extend the tax cuts, an average middle-class family might have to pay an additional $4,000 in taxes when they file their 2012 return in spring.
At the same period, businesses could lose several tax breaks that they have enjoyed for years. These include credits for investing in research and development, tax breaks for financial companies with overseas subsidiaries, and write-offs for retail stores and restaurants that upgrade or expand.
If Congress beats the deadline in the final minute, it could make it hard for taxpayers to figure out their 2012 tax bills. Analysts have already expected the upcoming tax season to be one of the more challenging ones on history.
President Barack Obama wants the Bush-era tax cuts on incomes above $200,000 for individuals and $250,000 for married couples to expire. He also wants to extend the tax cuts for people earning less. House Speaker John Boehner and other Republicans said that the extension should be across the board.
Speaker Boehner proposed increasing top rates for people earning more than $1 million last week but he wanted deeper spending cuts, especially in health care and other mandatory spending programs. President Obama didn’t accept the offer but it suggested that the speaker was willing to negotiate after the discussions stalled a few days ago.
But what are not tackled in the talks are the tax breaks that have already expired for 2012. Both parties said that those tax cuts would be tackled in the deal to avoid the fiscal cliff. They said that it should not be dealt separately.
