Debt Reduction Task Force (DRTF) Co-Chair Alice Rivlin made an appearance last night on PBS NewsHour to discuss the state of tax reform with the Tax Policy Center’s Donald Marron. After delving into the complexity of the tax code and the need to address both spending and revenues in any prospective debt deal, Rivlin and Marron offered their thoughts on what is expected to be a chaotic lame duck session.
Here are the major policy expirations (and other triggered policy changes) that the nation will face on New Year’s Eve, 2012:
- The tax cuts passed in 2001 will expire.
- The tax cuts passed in 2003 will expire.
- A long list of additional temporary tax reductions – probably most notably the research and experimentation (R&E) tax credit for businesses – will expire.
- The temporary inflation adjustment to the individual alternative minimum tax (AMT) expired on January 1, 2012 – which means that it will affect taxpayers when they file their 2012 tax returns in early 2013.
- The economic-stimulus temporary payroll tax reduction, which has been in effect since the beginning of 2011, will expire.
- The temporary extension of the duration of unemployment insurance benefits will expire.
- The Medicare “doc fix” – postponing reductions in physician reimbursements that were mandated in the Balanced Budget Act of 1997 – will expire. As of January 1, 2013, Medicare payments will decline by about 30 percent.
- Automatic spending cuts of about 9 percent on annually appropriated defense spending, about 7 percent on annually appropriated non-defense spending, and limited cuts on selected mandatory (“entitlement”) programs, will take effect.
The New York Times’ David Leonhardt has called it “taxmageddon.” Federal Reserve Chairman Ben Bernanke warned that congressional inaction would result in a “massive fiscal cliff,” endangering any economic momentum. Rivlin, however, may take the prize for the most creative name in describing Capitol Hill’s looming fiscal reality:
You can watch the full interview and read the transcript here.