December 19, 2012 – House Republicans and the Obama Administration continue to negotiate a potential deal to avoid the “fiscal cliff” of significant spending cuts and tax increases slated to take effect January 1, 2013.
House Republicans have introduced their legislative proposal, dubbed “Plan B,” that would extend the Bush-era tax cuts for all taxpayers earning less than $1 million. It also would affect the Alternative Minimum Tax (AMT), extend current estate and gift tax levels, and increase capital gains and dividend tax rates to 20% for people earning $1 million and more. Various budget cuts are also under consideration.
At the same time, Democrats are advancing their own bill modeled after legislation passed by the Senate last summer but with a tax-cut threshold closer to the President’s most recent offer of a $400,000 income limit. At this point the proposals of each side are not yet acceptable to the other, although there has been progress over the past few days.
Adding to the pressure to reach an accord, Fitch Ratings issued a report today that said going over the cliff could “tip the U.S. into an unnecessary and avoidable recession” and lengthy negotiations on the matter could risk the U.S. credit rating—and with it, potentially, the ratings of the most highly rated insurance companies.
TIAA-CREF’s Government Relations team believes a deal is more likely to be completed after Christmas. The team will continue to monitor developments, and we will issue further updates as warranted. In addition, we will be posting our regular Market Update on the home page of tiaa-cref.org on Friday. We also have plans in place to provide real-time updates should a resolution be reached before year’s end or if any decisions are made that impact retirement savings plans.