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Tuesday, October 2, 2012

Should IRS help allieviate the "fiscal cliff"?

The first two items are the key parts of the "fiscal cliff" and others are also budget problems.

A 10/1/12 Wall Street Journal blog notes that the IRS could alleviate the tax increase aspect of the "fiscal cliff" by not changing the withholding schedules for 2013. While true, that seems odd and wrong for a few reasons:
  1. The IRS did not cause the upcoming "fiscal cliff."
  2. If the 2001/2003 tax cuts are not extended, workers will be under withheld.
  3. It is unlikely that the 2 percentage point Social Security cut will be extended as it was for economic stimulus and intended to be temporary (although the withholding tables are not used for FICA tax).
  4. The withholding tables only affect workers, not investors with dividends and capital gains.
  5. It could be confusing to workers.
  6. It would send an inaccurate message that Congress does not need to do anything.
What do you think?  Should the IRS continue the 2012 withholding tables into 2013? What should Congress do and when?  

1 comment:

David @ Engage America said...

The most sensible thing Congress can do is reform the tax code according to the guidelines of the Bowles-Simpson plan.

Plain and simple.