The clock is running out on this session of Congress. While far from a sure thing, at least there is movement on the tax front. Whether that movement is progress or a step back will depend on your point of view.
It’s been said many times: Two things you don’t want to see being made are sausage and legislation.
This go-around with the recently negotiated tax bill is just such an example. In the spirit of the holidays, there is just about something for everyone in this proposed compromise: tax cut extension, cut in payroll taxes, a fix to the AMT exemption, extension of unemployment benefits.
While the full impact is yet to be digested, it is certain that the debate is far from over. And it is almost equally certain that in its present form it will likely add considerably to the federal budget deficit.
Since we are still in fragile economic territory, demand stimulus is still needed. And at least this proposal, while far from perfect, will provide that in the form of funding for unemployment benefits, lower payroll taxes and
Now that there will be “tax certainty” let’s see if the job creation will follow.
I’m happy to see that there is a patch for the AMT so that millions of families won’t be unexpectedly hit by a stealth tax increase. Unfortunately, a permanent fix of the AMT is not on the radar and we’ll be doing this again next year as well.
And from an estate planning point of view, there will finally be some certainty on this front – at least for now.
While ‘stimulus’ is a bad word, at least there will be some economically beneficial parts to the proposal. The most direct positive impact on the economy and aggregate demand is having more cash in the hands of average consumers. On this point, the extension of unemployment benefits, in addition to being just morally right, will put cash in the pockets of millions who will immediately circulate it for payment of needed goods and services – not to mention paying the mortgage to help avert more foreclosures.
I’m no fan of trickle down economics and don’t think that we can afford tax breaks that for the most part will not lead to job creation in the near term.
Now we’ll see how the proposal will fare in Congress. In any event, let’s hope that the sound you hear in the background is only the clock ticking down to the end of the session and not the timer of a not-t00-distant debt time bomb counting down to a nasty explosion.