As of yesterday, here's the latest offers from House Speaker Boehner and President Obama to avoid the fiscal cliff. They're actually not too far off from each other.
First, compare the two parties' current positions on the four tax increases and two spending cuts included in the cliff. (Savings or costs in parentheses are an annual average.)
- Bush tax cuts - R: Eliminate mortgage and charity deduction ($80 billion). D: Don't extend for incomes above $250,000. Both: Extend for those earning below $250,000. Maybe OK to raise rates to something less than 39% for household incomes above $250,000.
- Alternative minimum tax - D: Extend patch. R: Probably yes (they do every year).
- Obamacare taxes - D: Keep as is. R: Repeal Obamacare (although they realize that horse has left the barn.)
- Payroll tax cut - D: Extend for one more year ($95 billion). R: Have opposed, but may let slide for a year.
- Extended unemployment benefits - D: Extend for one more year ($30 billion). R: Have opposed in the past, but may let slide for a year.
- Sequestration - Both: No.
Second, here's their positions on additional stuff that has nothing to do with the cliff specifics, but are thrown into negotiations to further stimulate the economy or reduce the debt.
- Build roads - D: ($50 billion). R: No.
- Tax cuts for businesses - D: Extend tax acceleration for depreciation. ($25 billion). Extend research and development tax credit. R: Probably yes.
- Refinance mortgage incentives - D: Yes. R: No.
- Cut Medicare and Medicaid - R: Change cost of living adjustment formula or COLA ($20 billion). Other unspecified reforms ($60 billion). D: Maybe change cost of living formula and extend eligibility to 67. Both: Extend "doc fix" to prevent a 27% decrease in payment reimbursement.
- Unspecified non-defense discretionary spending cuts - R: ($60 billion). D: Need more specifics before commenting. (Source: CNN Money, Obama Plan Has $200 Billion in Boosters, December 4, 2012; CNN, House GOP Offers Plan to Avoid Fiscal Cliff, December 4, 2012)
What It Means to You
Right now, it seems the two sides will never come together because their philosophies are so different. However, both are playing to their constituents. They will probably come into agreement on most items, as detailed above.
The real crux in negotiations is how much more "rich" people will pay (probably through fewer deductions and a slight increase in the tax rate), and how much Medicare benefits will be cut (probably through a change in COLA).
- What Puts the "Fiscal" in "Fiscal Cliff"
- Extend Bush Tax Cuts for Small Business Owners
- Your Opinion - Should the Wealthy Get Tax Cuts?