Apparently in response to my post yesterday, I received a couple of questions from people as to whether or not I think Congress will let us go over the “fiscal cliff.” First let me say that I really do not believe the “fiscal cliff” is anywhere near as dire as media would lead you to believe. Going over the cliff (and the lead up to it) is a huge pain to planners and other professionals like myself because there are a myriad of end-of-year decisions that need to be made by businesses and individuals and it’s impossible to make those decisions without knowing the tax consequences. The only way the tax consequences can be determined is by knowing what the rules are going to be beginning January 1, 2013, and as of today, it’s very uncertain what those rules will be. But to the vast majority of people who aren’t facing those end-of-year decisions, the December 31, 2012, “fiscal cliff” is simply not what it has been made out to be and Congress knows it.
So to the original question of “Are we going over the cliff,” I say yes, more than likely. Speaker Boehner seems to be trying to send through a “test vote” with his recent “Plan B,” and we should get the results of that vote later today. The “test vote” on “Plan B” appears to be nothing more than an effort by Boehner to see who he can count on in the House when the time comes to pass the compromise legislation. If Boehner can get enough votes in support of his “Plan B” measure, he can take that to President Obama and finally get the spending cuts he needs to put a more serious bill before the House. So the vote on “Plan B” today is key to determining whether will go over cliff. The Senate is on recess until December 27 so assuming Boehner can indeed rally enough support for “Plan B,” then presumably, a second bill that would be the true compromise legislation would likely be voted on by the House sometime early next week, with the Senate holding their vote towards the latter part of the week when they return to Washington. However, if Boehner can’t garner enough support on the vote this afternoon, a leap over the cliff is all but certain.
However, I wouldn’t overly worry yourself about going over the cliff because sometime next year (hopefully in January, but perhaps in December 2013 if the estate tax bill we got in 2010 is any indication), we will get the bill we’ve all been waiting for, and it will very likely be made retroactive to January 1, 2013, erasing almost all of the tax consequences of having gone over the cliff. That’s not to say there won’t be significant changes in the tax structure from 2012 to 2013, but December 31, 2012, is not quite the “cliff” that it’s been made out to be.