HOW THE DEFICIT IMPACTED TAXES

Unless you have been living in a cave for the last couple of weeks, you know that Congress finally took care of the debt limit...well maybe. By extending the amount that they could borrow, they are allowed to keep sending out checks and avoid defaulting on its debts. Surprise, surprise. Another extension will not be needed until after the 2012 elections. It sounds like a political move to me.

The question that you have to ask is, “How does this impact taxes?”

Lawmakers kicked taxes down the road as part of their grand compromise on the debt ceiling. Republicans wouldn’t accept proposals from Democrats to include billions of extra tax revenues in the package. That money was to come from a major revamping of the tax code; reducing deductions and tax breaks while lowering rates.

The goal of the revised system was to raise hundreds of billions in additional revenue than under the current law. Thus, Congress isn’t likely to tackle serious tax reform anytime soon.

While it is true that the debt deal established a bipartisan deficit reduction panel that could vote to approve tax increases, the chances of that happening are slim. And even if the panel were to propose a tax hike, the House probably wouldn’t pass it.

This whole mess pretty much guarantees that taxes will be a key issue in the 2012 elections. Both Democrats and Republicans remain convinced that a majority of voters will support their position on taxes. Time will tell.