Fiscal cliff averted, now what?

January 2, 2013

A New Years to remember here in the nation's capital.  Here is a quick snapshot pieced together from various sources of the impact to higher education as a result of last night's vote on H.R. 8, the agreement reached between Congress and the White House on averting the "Fiscal Cliff" and immediate sequestration, albeit temporarily. 

The next Act(s) of this play is/are quickly around the corner however, considering:  

-- the legislation only delays the automatic sequester for two months until March 1. 
-- the increase in the debt ceiling needed in February will need to be decided soon. 
-- and the current Continuing Resolution (FY13 federal spending) expires on March 27. 

South Florida delegation voted:
Favor:  Congresspersons Diaz-Balart, Ros-Lehtinen, Wilson, Wasserman Schultz, Hastings and Senator Nelson 
Against: Congressman Rivera and Senator Rubio

From our SUS Washington Office:
As we understand the bill right now, this is the treatment of various education tax provisions:

  • Permanently extends expanded Coverdell Education Savings Accounts 
  • Permanently extends the expanded exclusion for employer-provided educational assistance 
  • Permanently extends the expanded student loan interest deduction 
  • Permanently extends the exclusion from income of amounts received under certain scholarship programs.   
  • Permanently extends the arbitrage rebate exception for school construction bonds
  • Permanently extends tax-exempt private activity bonds for qualified education facilities
  • Temporarily extends the American Opportunity Tax Credit, Earned Income Tax Credit, and Child Tax Credit  (Five years)
  • Temporarily extends the deduction for certain expenses of elementary and secondary school teachers. (2 years: 2012 and 2013)
  • Temporarily extends the above-the-line deduction for qualified tuition related expenses. (2 years: 2012 and 2013)
  • Temporarily extends the Qualified zone academy bonds (QZABs) allocation of bond limitation. The provision extends the QZAB program for 2012 and 2013 providing $400 million in bond volume per year.  
  • Temporarily extends the tax credit for research and experimentation expenses.  (2 years: 2012 and 2013)

In essence, It permanently extends all of the provisions of the 2001 tax bill except for raising rates for families with incomes over $450,000; raising the rate for dividends and capital gains for those same taxpayers and reinstating the "PEP and Pease" limits on itemized deductions and personal exemptions (though at higher income limits than previously applied).  

Although the agreement did not address payroll taxes reduction, in effect prompting an increase in payroll deductions now

From the White House: 

The agreement saves $24 billion, half in revenue and half from spending cuts which are divided equally between defense and nondefense, in order to delay the sequester for two months. This will give Congress time to work on a balanced plan to end the sequester permanently through a combination of additional revenue and spending cuts in a balanced manner.

Also from WH Fact Sheet (attached) 
•       Extension of Emergency Unemployment Insurance benefits for 2 million people: The agreement will prevent 2 million people from losing UI benefits in January by extending emergency unemployment insurance benefits for one year.

•       Extension of renewable energy incentives, the R&E tax credit and other business incentives: The agreement extends tax relief for businesses through the end of next year. This means extending the Production Tax Credit as well as the Research & Experimentation tax credit. In addition, the agreement extends 50 percent bonus depreciation, a cost-effective temporary measure to support investment and growth. All of these would be extended through the end of 2013.

•       Fixes the SGR (“doc fix”) with no cuts to the Affordable Care Act or to beneficiaries: The agreement avoids a 27 percent cut to reimbursements for doctors seeing Medicare patients for 2013 by fixing the sustainable growth rate formula through the end of next year (the “doc fix”). 

•       Capital gains rates for high-income households return to Clinton-era levels: The capital gains rate would return to what it was under President Clinton, 20 percent. Counting the 3.8 percent surcharge from the Affordable Care Act, dividends and capital gains would be taxed at a rate of 23.8 percent for high-income households. These tax rates would apply to singles above $400,000 and couples above $450,000.

•       Raises tax rates on the wealthiest estates: The agreement raises the tax rate on the wealthiest estates – worth upwards of $5 million per person – from 35 percent to 40 percent, in contrast to Republican proposals to continue the current estate tax levels.

•       Extends the farm bill through the end of the fiscal year, averting a sharp rise in milk prices at the beginning of 2013. 

Here is the White House full fact sheet: