After three months of waiting and the creation of the congressional “Super Committee“, made up of six democrats and six republicans, the “Super Committee” and Congress could not come up with a deficit reduction agreement of 1.2 trillion in spending cuts and possible tax increases by the November 23 deadline.
What Does This Mean for Taxpayers?
Tax implications of the decision(or lack of decision) remains uncertain at this point. What is certain are automatic (mandatory) budget cuts of 1.2 trillion, will commence in the beginning of 2013, unless Congress and the “Super Committee” can agree on a bipartisan (balanced) plan before January 2013.
The last resort, mandatory reductions, will cut evenly from both domestic and defense programs. The automatic Budget Control Act, passed in August, already mandated $450 billion in defense spending cuts over 10 years.
We also know that the credit rating agency, Standard and Poor’s issued a statement, that failure to reach an agreement would not downgrade the United States credit rating as long as the automatic spending cuts remained in place.
We will continue to update you on tax implications of the automatic budget cuts. Who knows, maybe congress will come up with a bipartisan agreement before January 2013. One thing is certain, we will find out soon if Congress can agree on a series of budget decisions set to expire – The payroll tax cut, which reduced the amount of social security taxes taken out of your paycheck and the extension of unemployment benefits both set to expire December 31, 2011 and Bush Tax cuts set to expire December 31, 2012.