Congress Passes the “American Taxpayer Relief Act of 2012”

On January 1, 2013, the American Taxpayer Relief Act of 2012 (ATRA) passed the U.S. Senate by a vote of 89 to 8, and the U.S. House of Representatives by a vote of 257 to 167.  Pres. Obama signed the legislation on January 2, 2013.  Technically, the Bush tax cuts expired by the time ATRA was passed, so the politicians can boast that they “cut” taxes by $3.9 trillion over 10 years, even though with reference to the law that existed on December 31, 2012, ATRA raises taxes by $620 billion over 10 years.  The White House claimed that this is the first time in 20 years that Congress acted on a bipartisan basis to vote for significant new revenue (tax hikes).  However, there doesn’t appear to be any significant spending cuts enacted as part of ATRA, so this country has a long ways to go to get its spending problems under control.

One of the good things about the ATRA is that many of the provisions are permanent.  By some estimates, over 50% of the tax code consists of temporary provisions, causing complexity and uncertainty for many taxpayers and businesses.  Since there is a good chance of tax reform in the next few years as Congress deals with the national debt, even “permanent” provisions may turn out to be in fact, temporary.

The fiscal cliff consisted of several major problems occurring nearly simultaneously:  major income tax increases, expiration of the 2% payroll tax holiday, spending cuts in military and non-military budgets under the 2011 automatic “sequestration” provision, reaching the national debt ceiling, and expiration of the temporary continuing spending resolution (an actual federal budget hasn’t been enacted since the last budget ended September 30, 2010).  ATRA only addressed the income tax increases and pushed off the sequestration spending cuts for two months.  Therefore, the fiscal cliff battles will continue between now and March 2013, when all of the other problems must be addressed.

I will publish in-depth blog articles on the ATRA tax changes covering individual tax provisions, business tax provisions, and estate and gift tax provisions.

ATRA also made the following changes:

·       Unemployment benefits for the long-term unemployed were extended one year to December 31, 2013

·       The 27% cut in payments to doctors treating patients on Medicare is delayed one year to December 31, 2013

·       The 2008 Farm Bill expiration date is extended to September 30, 2013, which averts a potential spike in milk prices to nearly $8 a gallon!

·       The scheduled 2013 fiscal year inflationary pay increase for members of Congress is canceled.