Fiscal Cliff Prediction Will the Fiscal Cliff occur?

By Jeffrey Brooks, CPA, CFP, MBA for Jbrooks Wealth Advisors, PC, a Professional CPA and CFP Firm jeff@jbrookswa.com 602-292-2009 Please consult with your professional tax CPA regarding your specific circumstances!
Fiscal Cliff news is too pessimistic!
Although the news is negative, I believe there will be an agreement by the end of January since the Democrats have picked up seats in the house in the last election. If you take 100% of all of the Democrats voting for an amount under $1 million (maybe $500K) and some Congressional Republicans voting for an amount over $250K, a deal will be reached. Obama and the Democrats will find additional budget spending cuts.

The Democrats and Republicans will each claim victory. Obama will claim that the wealthier are paying more taxes and unemployment benefits were extended and the Republicans will claim that they were able to get the tax rate reduced for most small business owners and were able to reign in abusive spending. Both parties will take credit for correcting the Alternative Minimum Tax problem that now squeezes additional tax out of 30 million Americans.
Unfortunately for taxpayers trying to get their taxes filed early and get refunds, the IRS may not be able to get the new tax forms ready by February 1. Some taxpayers who file will have to amend their tax returns after the revised forms are issued by IRS to software companies who then have to revise their software.

A stop-gap that puts everything off for a while but resolves nothing is now the most promising alternative, if there is to be one, to the across-the-board tax hikes and spending cuts described as a “fiscal cliff” because they threaten to send the U.S. economy plunging into another recession.
It is also the way fiscal showdowns have ended in Washington in recent years.
Such a fix, at best, would delay the spending cuts and tax hikes further into 2013 as well as work to address in a long-term way a government budget that has generated deficits exceeding $1 trillion in each of the last four years. Even worse, it would set up a huge fight in January and February over raising the U.S. debt ceiling, which controls the amount of money the federal government can borrow.
The steps that Obama outlined were immediately rejected by Republicans, who have given ground on their previous steadfast opposition to any tax hikes but are still demanding that the White House agree to more substantial spending cuts.
But Obama has promised repeatedly to veto any extension of the expiring Bush-era tax cuts that fail to hike rates for the wealthy.
ITG Investment Research Chief Economist Steve Blitz on Saturday said sliding the “fiscal cliff” negotiations into the new year was not a huge deal. “I think markets will pressure for a deal in January,” he said.
The “pressure” could be in the form of a significant stock market drop, which would hit workers’ retirement plans, threaten to deter consumer and business spending, and possibly rattle other countries’ economies at a time when the global economy is far from robust

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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