Sticking points in fiscal cliff talks
December 31st, 2012
08:28 AM ET
1 year 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. Rudy NYC

    Why should there by a specail capital gains rate, anyway? Why is it if my company sells widgets that I should pay a higher tax rate on my salary than a company that sells capital? Please, do not make the "double tax" argument because the same argument can be made for the company that sells widgets.

    The AMT tax rate was modified under the GWB to hurt the middle class. Bush put in place many deductions he claimed were meant to "encourage investment" by the middle class. Most people living on average incomes are living paycheck to paycheck and cannot afford to invest 10% of their incomes into the types of long term investments encouraged by the changes. So, the AMT caused most of the middle class to pay more taxes, at a time when the wealthiest Americans were enjoying handsome tax cuts. Now you know why tax revenues increased during the Bush administration.

    It was the AMT that was responsible for a large part of it, not higher investment incomes that the right wing leads you to believe. Ask yourself, those of you in the middle class. Did the AMT cause you to pay more or less in taxes during the Bush years? It caused you to pay on average about signiicantly more, didn't it? The investment threshold percentage of your income were too high for you to take advantage of them.

    December 31, 2012 08:49 am at 8:49 am |
  2. Rudy NYC

    I do not think that most people realize that the tinkering of the AMT by the GWB administration caused most people earning $50k-$100k to pay a higher rate. Most in the bracket do not usually compute their own income tsxes. I recompute my own taxes just to follow up on the expert who did it for me, because I am ultimately responsible for any mistakes not the expert. I have seen that I would have payed *significantly* less without the AMT.

    December 31, 2012 09:02 am at 9:02 am |
  3. librich

    Every poll I've seen lately has the majority favoring going over the cliff. Americans are tired of the political shenanigans and the lack of responsibility in Washington. The Bush tax cuts were never reasonable, and they aren't reasonable now–for any income bracket. The military has to be cut back and the social programs have to solvent. Let's take the medicine.

    December 31, 2012 09:05 am at 9:05 am |
  4. what's up

    The Obama Cliff is here. You are screwed!

    December 31, 2012 09:06 am at 9:06 am |
  5. wwf

    What a joke. It is time the American people get serious. I for one am tired of my tax dollars going to pay these idiots salaries, benifits and pensions. Seen as how most of them work for the special interest groups and those makeing millions and billions instead of the common American person, let them pay for their salaries, benifits and pensions. The GOP compliains about entitlements. The biggest entitlement out their is what they are getting paid for doing nothing. Congress is collecting welfare payments for dong nothing. Time to stop. Time for term limits, health insurance the same as everyone else, and no pensions for life just for working at a part time time, or in the case of this congress, no job. Pay raises voted on by the people at elections time every four years. Problem is, they throw the masses just enough nibblets of corn to keep them in line.

    December 31, 2012 09:07 am at 9:07 am |
  6. plain&simple

    What's up with extensions? Make a law make it permanent....don't want to and don't need to go through this bs again! Do something and stick with it until you see it working or not working. Just because the internet moves at the speed of light doesn't mean our lives and economy do! Short term fixes mean you're always fixing....solutions are the answer!

    December 31, 2012 09:12 am at 9:12 am |
  7. Gurgyl

    Obama, please do NOT cave in to GOP nasty tricks–2014 people decide GOP fate–people are VEXED. God bless.

    December 31, 2012 09:17 am at 9:17 am |
  8. christopher rreid

    Relations sour between competing factions .

    December 31, 2012 09:27 am at 9:27 am |
  9. disgustedvet

    One of many sticking points ( perhaps the major one ) is in the middle of that picture: Harry "My Way Or The Highway " Reid.

    December 31, 2012 09:28 am at 9:28 am |
  10. Phip

    "The government do take a bite, don't she?"

    December 31, 2012 09:32 am at 9:32 am |
  11. taxedmore

    Don't forget the 47% who think their "fair share" is zero.
    You know who I mean – the ones who pay nothing but complain about other people not paying enough.

    December 31, 2012 09:32 am at 9:32 am |
  12. Walter Harold Marlin

    Lower taxes on the middle class and extend the Bush era tax cuts at the same time. How to do this? One word. Tariffs. By decreasing taxes on the middle class a dramatic increase in tariffs would be offset with no negative impact on the middle classes purchasing power.

    December 31, 2012 09:34 am at 9:34 am |
  13. Liberally Challenged

    They need to get this crap figured out-they've known this was coming for months. And, it better be a permanent solution. Put the payroll tax back to where it was, and increase taxes over anyone with a combined household income of over $400,000. This is palatable, and we are talking about about a 3% increase anyway. $12,000 should be nothing to someone making that kind of cash.

    December 31, 2012 09:35 am at 9:35 am |
  14. paul

    Note to self: oppose re-election of the senators and congressmen who cannot resolve these issues which they were elected to do as part of running the country..

    December 31, 2012 09:35 am at 9:35 am |
  15. Mike

    NORAD has dected though radar that they have located the most stupid people in the world, at this time they claim they are all located at Capital Hill in Washington, D.C.

    December 31, 2012 09:36 am at 9:36 am |
  16. Name lynn

    president obama is waiting on them slow republicans an boehner for a new year fiscal cliff if not its abama way the republicans an boehner is trying so hard to make obama change his mind about the rich people paying higher taxes but they know that is going to happen they know its obama time

    December 31, 2012 09:39 am at 9:39 am |
  17. superlogi

    In reading all of those points, one thing is never mentioned. Not only do I see no cuts in spending, but suggested increases. We've been borrowing 10% of GDP over the last 4 years to juice the economy and we're seeing an actual increase in GDP of 2%. It appears all that borrowing isn't doing the job. Perhaps it's time to do something a bit novel like paying most of our bills when the invoice arrives and not putting them in a lock box for later generations to take care of.

    December 31, 2012 09:40 am at 9:40 am |
  18. Anonymous

    Lets just fire them all they are not worth the money they get paid

    December 31, 2012 09:40 am at 9:40 am |
  19. Grumpster

    Neither party has any desire to pass anything. They both want us to go over the cliff so they can all claim that they "cut taxes" once they have gone up past where any of them really want to see them at. So...expect us to go sailing off like Thelma and Louise....then have a last minute baseball glove come out of nowhere to catch us before we end up like Wile E. Coyote smashing into the bottom of the canyon.

    December 31, 2012 09:40 am at 9:40 am |
  20. The King

    There it is. The republicans are all about looking out for the interests of the wealthy...exclusively. What a shocker.

    December 31, 2012 09:41 am at 9:41 am |
  21. Anonymous

    OK I guess i see............they agree today, then the law cannot go into effect until tomorrow so the Republicans actually lowered taxed and were good puppets to their king (king grover) who would have taken them out of office if they dare disobey.

    It is pretty sad the Republicans think the rest of us are so under informed (as they like to say) to think we do not understand what is happening.

    Most of us have had five year old children lie with their fingers crossed behind their backs.

    President Obama is good for four years. You Tea Party Republicans might need to start looking for a new job before 2014.

    December 31, 2012 09:41 am at 9:41 am |
  22. unknown11

    Wait a minute. The democrats have been telling us for years that the Bush tax cuts were for rich people. And that is one thing that got him elected. Now you are telling me that we all got the Bush tax cuts? Something is dishonest about what Obama and his friends have been saying.

    December 31, 2012 09:43 am at 9:43 am |
  23. noteasilyswayed

    Keep them locked up and do not let them go home until they pass a deal. Both chambers, as well as the executive, owe this to the American people. Blaming one side or the other will no longer do. Get'er done!!!!

    December 31, 2012 09:43 am at 9:43 am |
  24. Joe

    Unbelievable. All they are arguing about is how much to cut taxes and spend money. We'd all better start learning to speak Greek as long as these blank-holes are at the helm.

    December 31, 2012 09:46 am at 9:46 am |
  25. michedionne

    I think our government should pay for there own insurance like us,nothing here is free...

    December 31, 2012 09:46 am at 9:46 am |
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