Will Mid-Class tax cuts be a solution which will solve fiscal cliff issue

So long for the Starbucks “Come together” campaign; the war is still on in the senate over the fiscal cliff debacle. One good thing was the President ended the Friday session on an optimistic note saying it was possible to “reach an agreement that could pass both houses in time.”.

Senate Majority leader Harry Reid may propose a bill to renew middle class tax cuts in case the Democrats and Republicans don’t find an agreement before Sunday.

In his speech to the Senate floor after the Friday sessions Reid stated the coming twenty four hours as “very instructive” in coming to an accord. Republican leader, Senator McConnell said he remains “hopeful and optimistic” of presenting a final deal to his side of the house by Sunday.

Market sentiment was edgy before the Friday session amid rumors hat President OBAMA would neither give in for the congressional amends nor lay out a new version from his side of the house to bring an end to the five session long debacle.  The House of Representatives will join again for a Sunday session to vote. The Senate will also be in quorum on Sunday, Reid stated.

This way or that the final Reid-McConnell deal is sure to involve Taxes of some sort. The President however has relaxed his recommended income slab for current tax rates to 400,000 and above from the former proposals of $250,000. Still this is too high for a Republican conceit without any concessions from Democrates, sources say. Obama is in for extending unemployment benefits though.

The year 2013 will bring an end to the tax reliefs from Bush-era and trigger $110 billion spending cuts annually for the next ten years. The total impact on both Pentagon and Federal expenditures, amounts to $1.2 trillion over 10 years time; a fiscal cliff that may push the country into the vicious circle of recession.

Without a deal on the table the tax holiday for salaried individuals enacted by Obama’s administration will also expire damaging the interests of over 2 million jobless Americans.

While many believe that a short term escape from the cliff is a viable choice Reid disagrees. In his talks after the day close on Friday Reid contended that any short term recourse would be “imperfect.” The only difference would be that Lawmakers would have a face saving opportunity to vote for lower taxes once they have been enacted.

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Published by Christine Lawrence

Christine Lawrence is a financial analyst. She loves analyzing socioeconomic trends in the background of financial moves. She has overall seven years of experience in Auditing, Finance and Writing.

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