To some it is almost amusing that the United States is unable to take care of the important business of climbing down from the “fiscal cliff.” However, today’s delay is going to be tomorrow’s mess. There is a lot of talk now that both parties believe that going over the cliff could bring about a more favorable solution of the problem instead of averting it before December 31. Their thinking is flawed.
For instance, the Internal Revenue Service has already warned Congress that if they do not resolve the fiscal cliff crisis by December 31 as many as 100 million taxpayers will be unable to file their 2012 tax returns until late March because of the Alternative Minimum Tax.
Not only would these taxpayers have their refunds delayed but they also will not be buying things with their refund money during the first quarter. Not a great idea when unemployment is still too high. In prior years these refunds were between $117 billion and $136 billion–no doubt freezing these funds out of the first quarter of the 2013 economy is a terrible idea.
Folks who process payrolls don’t know what to do! Without guidance from Washington regarding income tax withholding from workers’ paychecks they will just continue with the 2012 withholding tables. Then, if Congress can’t reach a deal until next year they’re hoping that Congress won’t make it retroactive to January 1, 2013. If Congress does make it retroactive then all the payroll systems need to be changed in order to correct the 2013 checks for all checks that have already been cut.
Wealthy folks are scrambling, according to estate lawyers, to transfer wealth this year in order to avoid what could be a significantly higher gift and estate tax if Congress does nothing. However, most folks in Congress support a more lenient version of the tax— but have not reached agreement on the actual tax rate
The Centers for Medicare and Medicaid Services has also already warned Medicare physicians that they will have to process 2013 claims according to current law. This translates to a 27% cut starting with claims filed January 1, 2013. In past years Congress always passes what they call the “doc fix” and if they do so again in early 2013 that could prevent the cuts from occurring as it takes two weeks to process a physician’s Medicare claim.
What Dr. Jeremy Lazarus president of the American Medical Association had to say expresses the view of most Americans:
“With a full year to stop this drastic cut, it is absolutely inexcusable that Congress has failed to act, leaving Medicare patients and physicians to deal with the consequences.”
That’s pretty much the way all of us feel, Doc.
This article was first published on http://moneyprime.com.