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LEGISLATIVE UPDATE FOR JANUARY 8, 2013:

Fiscal Cliff, Budget and Appropriations Update


Fiscal Cliff
The 112th Congress returned to Washington for a lame duck session following the November elections with a list of issues which needed to be addressed before the end of 2012.  The two most pressing items were tax cuts for all Americans set to expire on December 31, 2012 and automatic spending cuts, or sequestration, set to take effect on January 3, 2013.  As negotiations stalled in December congressional leaders turned their efforts to a scaled-back deal preventing taxes from rising.  Returning from the Christmas holiday the White House and Senate Leaders engaged in serious negotiations on tax increases and spending cuts.

On January 1st, 2013 the Senate passed H.R. 8, the American Taxpayer Relief Act of 2012, by a vote of 89-8. 


The House had previously passed H.R. 8 on August 1, 2012, but took up the Senate passed and amended bill on January 1, 2013 by a vote of 257-167 paving the way for President Obama’s signature on January 2, 2013.

Below are highlights included in H.R. 8:
• Increases tax rates on individuals making above $400,000 and families above $450,000;
• Increases the capital gains and dividend rate from 15% to 20% for individuals with income above $400,000 and couples above $450,000.
• Allows the 2% reduction in Social Security payroll tax to expire back to a rate of 6.4% meaning workers will have more withheld from their paychecks beginning January 1, 2013;
• Includes a permanent patch for the alternative minimum tax (ATM) by setting the exemption amounts at $50,600 for individuals and $78,750 for couples; and
• Permanently extends the current exemption amount from the estate tax, exempting estates up to $5.12 million.  And increases the maximum rate from 35% to 40% for estates above the $5.12 million amount.

Sequestration, or automatic spending cuts, was included in the 2011 Budget Control Act as part of the debt ceiling agreement reached in August of 2011.  H.R. 8 delays sequestration for two months.  Under the measure, the sequester for FY 2013 would be implemented on March 27, the same day the current six month Continuing Resolution (CR)funding the government expires.  The White House will be required to release its sequestration report and order the cuts on March 1.  The total automatic cuts for FY 2013 are currently estimated at $109 billion, but would be reduced by $24 billion, meaning the total cuts through sequestration for FY 2013 would total $85 billion.

FY 2013 Appropriations
The current six month CR passed by Congress at the end of September 2012 is set to expire on March 27.  With the fiscal cliff occupying most of debate in Washington, the 113th Congress will have to act by March 27 to continue funding the federal government or risk a shutdown. 

Debt Ceiling
On December 31, 2012, the federal government officially ran but by delaying certain payments the limit won’t be reached until the end of February 2013.  Congressional leadership is already taking sides on the issue.  Republicans are hoping to leverage new spending cuts in return for a debt limit increase and Democrats and the White House are holding firm on their position of not willing to bargain for an increase in the debt limit.

Emergency Sandy Supplemental
The Senate voted on and passed a $60.4 billion spending supplemental for the region of the country affected by super storm Sandy.  The House was scheduled to vote on the package on January 1 but was pulled from the floor by House Leadership.  The House voted on January 4 to provide $9.7 billion in additional borrowing authority for the National Flood Insurance Program.   Later that same day, the bill passed the Senate by unanimous consent.  The House will vote on the remaining $50 billion of the President’s request on January 15.

Earmark Ban Expected to Continue
The House Republican Conference was set to vote on whether to restore earmarks as part of the House Rules for the 113th Congress, but the amendment’s sponsor, Rep. Don Young (R-Alaska) pulled his plain before a vote took place.  Rep. Young’s amendment would have exempted from the definition of earmarks any measure that funds a federal, state or local government entity as long as the measure does not increase the appropriations amount allocated by the Budget Committee.  As a result, the currant ban on earmarks will remain in the House.

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