Fiscal Cliff ... What?

Unless House Senate & President reach agreement before Dec. 31st By Barry L. Kennedy Texas Insider Report: WASHINGTON D.C. On the road to Americas economic recovery there is an obstacle. We see it. We know its there. And we know its approaching quickly. It is a massive daunting Fiscal Cliff" the scheduled expiration of the 2001 & 2003 Tax Rates coupled with indiscriminate Sequestration & Budget Cuts.   The problem is that neither political party in Washington D.C. at least for the time being seems to be taking it seriously. Instead both sides are using the issue as a political football. By doing so federal policy-makers are creating more uncertainty for employers including for businesses in Nebraska. This lingering uncertainty is significantly contributing to the countrys low hiring rates and high jobless numbers. In the best-case scenario Washingtons failure to act threatens to stunt the recovery; at worst it could derail our U.S. economy sending us back into recession or worse. Time is running short. Unless the House Senate and President Barack Obama reach an agreement before Dec. 31 the United States will experience its highest tax increase in history as the following actions would be implemented:

1. The top rate for individual income taxes including the rates for many small- & medium-sized businesses would increase to nearly 40.
2. Tax on dividends would soar to a maximum 43.3.
3. Tax on Capital Gains would go as high as 23.8 (of which 3.8 is due to the new health care law).
4. The Estate Tax would explode to 55 as the exemption drops from $5 million to $1 million.

We have arrived at this situation because policy-makers in Washington for years ignored their out-of-control spending while disregarding the federal debt. Even though our association and many others have long advocated a balanced budget amendment the concept has been unpopular inside the Beltway. Instead of making tough decisions to balance the budget as our state and local leaders do Capitol Hill and the White House have instead elected to kick the can down the road. Analysts now predict the federal government will hit its $16.4 trillion debt ceiling between this November and early January 2013. Late last year when both sides finally agreed to address the debt crisis they disagreed on how to do it. That is how this fiscal cliff was created.

Now it poses the single biggest economic threat to Americas economic recovery.

The U.S. Chamber estimates that 940000 U.S. businesses would be hit with considerably higher taxes if current rates are allowed to expire. That means less money for private businesses to invest in capital assets fewer resources to hire new workers and less ability to grow our economy. The nonpartisan Congressional Budget Office spells out the cost of inaction: a recession with 2 million jobs lost in 2013. If the Bush-era tax rates expire and automatic spending cuts are implemented unemployment would rise from 8.3 percent to 9.1 percent the CBO estimates. The Nebraska Chamber has joined our two national affiliates the U.S. Chamber of Commerce and the National Association of Manufacturers in urging federal lawmakers and the White House to avoid the pending fiscal cliff. A letter signed by all three of our or- ganizations as well as others will be sent to President Obama and congressional leaders in early September. In the letter the State Chamber and other cosigners will urge immediate action to avoid the fiscal cliff by taking these steps:

1. Extend all of the 2001 and 2003 tax rates for all taxpayers including small-business owners and job creators.
2. Extend vital business tax provisions.
3. Find spending cuts to replace a sequestration (indiscriminate across-the-board cuts) that was never meant to go into effect.
4. Firmly commit to comprehensive tax and entitlement spending reform in 2013.

You can get up to speed by visiting the U.S. Chambers Fiscal Cliff Countdown website. There you will find a tax calculator to estimate how much your taxes would increase if current rates expire. Then take a moment to urge your U.S. Senators and Congressmen to act to prevent the largest tax increase in U.S. history. Tell your representatives to do everything in their power to steer clear of the fiscal cliff. Tell them that your community your business or employer and your family are counting on fundamental tax and spending reform to fuel American competitiveness and growth over the long haul. We urge all Nebraskans (and Americans) to get involved on this critical issue. Barry L. Kennedy is President of the Nebraska Chamber of Commerce & Industry.