Sticking points in fiscal cliff talks
December 31st, 2012
08:28 AM ET
10 months ago

Sticking points in fiscal cliff talks

Washington (CNN) - The key figures involved in fiscal cliff talks have released few details about negotiations since they restarted Sunday afternoon. But we do have a clearer snapshot of the major points of debate before Vice President Joe Biden and Senate Republican Leader Mitch McConnell took over negotiations on Sunday. CNN's Capitol Hill team collected this information from sources and lawmakers involved in and briefed on negotiations up to that point.

• Income tax rates: Over the weekend, Democrats raised their threshold for tax increases to $450,000 in family income ($400,000 for individuals), a Democratic source tells CNN's Dana Bash. Party leaders had started talks at the $250,000 level, with President Barack Obama at one point offering $400,000 as part of a larger deal. Senator Dick Durbin, D-Illinois, told CNN on Sunday that leaders were discussing a permanent, not temporary, extension of most tax rates. It's unclear how that relates to possible tax reform in the future.

• Estate tax: This has been a significant point of discussion, senators from both parties confirmed Sunday. Republicans would like to extend the current estate tax, which has a top rate of 35% and affects estates worth more than $5 million. With no action, that will shift to a top tax rate of 55% and would hit estates worth more than $1 million.

Democrats have said they are discussing the issue as part of negotiations, but stress that they consider this a tax gain for the wealthy. A possible compromise could be the 2009 estate tax rates, which set the top rate at 45% and exempted estates up to $3.5 million. Several senators mentioned the 2009 rates on Sunday, but stressed that they are not directly involved in talks and were not sure whether negotiators were focused on those numbers.

• Capital gains tax rate: On Saturday, the two sides traded offers to create a 20% capital gains tax rate for higher incomes, Sens. Dick Durbin, D-Illinois, and Olympia Snowe, R-Maine, separately told CNN, while lower incomes would keep the current 15% rate. But, the senators said, the two sides had not agreed on the income level that would trigger the higher taxes. Snowe said $250,000 was one level discussed. If Congress doesn't act, the current capital gains rate of 15% will automatically go up to 20% for all investors.

• AMT patch: leadership and Senate sources on both sides told CNN that negotiators went back and forth over whether to do a short-term or permanent fix for the Alternative Minimum Tax, which would otherwise hit an estimated 30 million additional taxpayers. The patch is expensive either way, cutting revenue roughly $92 billion for one year or more than $900 billion for 10 years, according to the Congressional Research Service.

• Unemployment benefits and Medicare doctors: As of Sunday afternoon, negotiators had not yet determined how to deal with these twin extensions, including how or whether to offset the costs. Extending unemployment benefits for a year would cost $30 billion, according to the Congressional Budget Office. The agency says averting a Medicare pay cut would mean $25 billion.

Durbin said that at one point Republicans had suggested paying for the one-year extensions with savings from switching to the "chained CPI" as a measure of cost of living. Democrats balked at the idea, in part because they would be agreeing to a permanent benefit cut (from the new CPI) in exchange for temporary, one-year benefits extensions. On Sunday, Senate Republicans told reporters that the chained CPI was no longer on the table in these talks, adding to questions about funding for the unemployment and Medicare doctor fixes.

• Sequester: CNN learned on Sunday from Democratic and Republican senators that Democrats at one point suggested postponing or delaying the sequester for one or two years. Republicans exiting their caucus meeting Sunday afternoon, including Snowe and Sen. Bob Corker of Tennessee indicated the idea was a non-starter with their party, largely out of fear that the sequester delay would not be offset and would add to the deficit.

CNN's Deirdre Walsh, Ted Barrett and Dana Bash contributed to this report.


Filed under: Congress • Fiscal Cliff
soundoff (45 Responses)
  1. Joseph

    Let it go over...
    Was taxes that should have been paid in the first place.
    Comes 2013, The Democrat as well as the Replubican can all claim to havelowered taxes on 98% of the Population.
    Actually, this Cliff is needed to revitalize the economy.

    December 31, 2012 09:47 am at 9:47 am |
  2. Arlo Miller

    Our current Congressional Leadership will go down in history as some of the poorest leaders this country has seen. Compared to their predecessors, who negotiated major legislation through honest dialogue and genuine compromise, today's leaders negotiate like 2nd graders, completely unwilling to see anything from any position but their own and turning into a bunch of whining babies if they don't get their way. They have brought shame upon the House and Senate.

    December 31, 2012 09:48 am at 9:48 am |
  3. Deez

    The Republicans will start having a point when their beloved "job creators" take responsibility for anything. If they don't create jobs, why is it never their fault? And since when do job creators hire if their customers aren't creating the demand by actually buying their products?

    December 31, 2012 09:48 am at 9:48 am |
  4. Grumpy2012

    All I read about was tax increases. Didn't hear a word of any spending cuts and the "chained-CPI" is a third rail that will quickly be repealed as seniors find out their Social Security is being cut in favor of welfare.

    December 31, 2012 09:48 am at 9:48 am |
  5. albertabound

    this process is absolutely ridiculous, the American people gave their mandate in the election, and yet the GOP, Greedy Old Pigs, insist on continuing the financial rape of the poor and middle class citizenry.
    Heads up America, the world is laughing at you and will enjoy your pain!

    December 31, 2012 09:49 am at 9:49 am |
  6. Dale

    Don't worry, what ever the out come of these negotiations, politicians will not be effected financially in any way.

    December 31, 2012 09:51 am at 9:51 am |
  7. Walter Harold Marlin

    Lower taxes on the middle class while extending the Bush tax breaks. How to do this? One word. Tariffs. Decreasing taxes on the middle class would offset consumer price inflation brought on by tariffs all having no negative impact on the middle classes purchasing power. Food prices on most part would not be effected because food is largely domestically produced.

    December 31, 2012 09:52 am at 9:52 am |
  8. Arizona Slim

    We, the taxpayers need all the information provided in one format. CNN please use one format, for instance costs and benefits in US Dollars per year, or per decade. How many dollars cut? What expenses shall we reduce? How much additional revenue from these possible sources? The artical is intended to hide this information? Please report the news in a useable manner. Thank You.

    December 31, 2012 09:52 am at 9:52 am |
  9. rameshgulatee

    ever wondered that the tone of the negotiations would be different if the discussons and deliberations of the fiscal cliff, debt celing etc. between WH, Senate, Congress were televised live in the country!!!

    December 31, 2012 09:53 am at 9:53 am |
  10. peick

    Pain now or pain later. Take your pick. We cannot wish away the ultimate consequences of spending more than we make.

    December 31, 2012 09:54 am at 9:54 am |
  11. Chuck

    Sticking points ???
    Obama
    Reid
    Boenher
    McConell

    December 31, 2012 09:55 am at 9:55 am |
  12. Jacob Murphy

    The negotiations with regard to the pending 'fiscal cliff' (a poor term, but one which has gotten media – and thus, public – attention) should not be on the plan itself. Instead, the negotiations should be at the level of strategic goals for the nation/government. Are the party leaders at least in agreement on these goals?

    These are officials who are elected by broad constituencies to better the local, state and national environments. Negotiations of these sorts should NOT be adversarial at the level of broad goals and vision. There are sticking points, for sure, but the commonalities are greater in number and intensity. The negotiations should be at the level of tactics, but this cannot occur unless there is a consensus vision.

    Upon agreeing to a vision for the country, a unified proposal for actually achieving those goals can be found. Discussing the tactics without the strategy is myopic. Then again, should we expect better from our officials?

    Let me answer that: No... we should demand it.

    December 31, 2012 09:55 am at 9:55 am |
  13. Gabbo

    NO SURPRISE HERE – the liberals are trying to kick the can down the road for the next administration – YET AGAIN.

    December 31, 2012 09:56 am at 9:56 am |
  14. NN

    Main thing is to keeping fueling one of the most wasteful and corrupt governments in the world...

    December 31, 2012 09:58 am at 9:58 am |
  15. Malloy

    There is only one sticking point: A Democratic Black Man is the President. The Teapublicans will never accept that, and will never cooperate with him.

    December 31, 2012 09:58 am at 9:58 am |
  16. MISS MARY

    PLEASE....come to an agreement on time!!! America needs your help guys!!

    December 31, 2012 09:59 am at 9:59 am |
  17. georgex

    The president has stuck to $250,000 having to pay more. So Boehner has to be contrary and now wants $400,000 while before he wanted one million income. Whether he can actually get anything passed in the Republican House is questionable. Someone in the $400,000 range can afford to pay a bit more taxes

    December 31, 2012 10:00 am at 10:00 am |
  18. chris hemming

    i think the goverment is plain old greedy and i wish they could be put in other peoples shoes so they can feel what the middle class feels when we are voteing for plane old theafs next time i think we as us citazins should watch out for who we vote for or no one should should have to deal with our goverment stealing from us so can get richer while us people suffer for their problems

    December 31, 2012 10:00 am at 10:00 am |
  19. Kidding right?

    So......the Republicans have earned a well deserved reputation as obstructionists thanks to the hard arm tactics they employed last year. They have long behaved like bullies–and that reputation is now coming home to roost.

    Which is a shame, because they are somewhat right both on cuts to spending and on the tax issue. Any tax at a threshold below $450K will negatively impact people who live on both coasts, where these are not extravagant incomes but rather upper middle class incomes. The sort of people who have small business or who just pay an awful lot in real estate and taxes to live near a job that pays a "fat salary" which in reality covers much less by ways of a standerd of living that they would have in other parts of the country with a more modest salary.

    Similarly, we are in a bad way with the deficit where we literally spend 3x what the government brings in by way of revenue.

    At the same time–some of the other Republican stances are a joke......so I am afraid that this one time they may be making a little bit of sense, a lot of people have already tuned them out. Obama keeps saying they are about taxes-but really, their sticking point is expenses.

    .....but that doesn't excuse Obama–whose "this has nothing to do with me" stance is infuriating. LEAD, Obama. GET ON THE PHONE, INVITE REPS TO THE WHITE HOUSE. CHARM THEM and GIVE THEM SOMETHING THEY WANT. This fiscal cliff is legislation HE enacted and if we go back into a recession, he will be just as accountable as the Republican bullies.

    December 31, 2012 10:04 am at 10:04 am |
  20. Ratherbboating

    Capital gains tax rate: 250k for the higher tax rate to kick in sounds about right. If you tax everybody at 20% then there is no reason for smaller investors to invest. Taxes would eat up all profits.
    Estate tax: It needs to be raised. I know that you say that a million is a lot, but to a rancher or farms, it is not very much. On ave it takes 2.5 acres to raise a cow. 100 cows is about 250 acres, at $10k per acre that's $2.5 million. Who is going to raise your food if these ranchers can not afford this tax? (an ave cattle rancher here in TN has 50 head and holds a full time job elsewhere). There isn't as much money in it as you might think.

    December 31, 2012 10:04 am at 10:04 am |
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