Q: What is the fiscal cliff and who created it?
A: Congress and Obama did it on purpose, creating a confluence of events that were designed to put pressure on themselves to act on taxes, spending and the budget deficit.
In 2010, they extended the George W. Bush-era tax cuts for two years, meaning that breaks on income, capital gains, dividends and estates will lapse at the end of this year. In 2011, as part of a deal to raise the U.S. debt ceiling, they set up $1.2 trillion in spending cuts to occur over nine years, starting in January 2013. This year, they extended a two- percentage-point reduction in the payroll tax through Dec. 31.
Q: What has the House passed?
A: The House, controlled by Republicans, passed a bill in August that would extend for one year the expiring tax cuts and begin a process for overhauling the tax code. It was silent on extending tax credits from the 2009 stimulus law for low-income families and college students. The House has also passed bills that would delay automatic spending cuts by replacing them with other cuts.
Q: What has the Senate passed?
A: The Senate passed a bill in July that would extend the tax cuts for one year on income up to $200,000 for individuals and $250,000 for married couples. It also extended tax credits from the 2009 stimulus law for low-income families and college students. It was silent on the estate tax because of disagreements among Democrats, and it doesn’t address the automatic spending cuts.
Q: What issues has neither side dealt with?
A: Neither the House nor the Senate has addressed the expiring payroll tax cut, dozens of lapsed miscellaneous tax breaks, expanded unemployment insurance that’s expiring or a scheduled payment cut to doctors under Medicare.
Q: What was Obama’s latest offer?
A: Obama’s latest offer reduced his revenue demand to $1.2 trillion from $1.4 trillion, made a concession on future Social Security benefit increases and spared households with between $250,000 and $400,000 in annual income from tax-rate increases.