Legislative Update

In my last update in November I discussed the so called super committee and their looming deadline to reach an agreement on a plan to reduce the deficit.  As you are all aware by now, they did not meet that deadline and no agreements were reached.  The “super” committee turned out to be not so super after all!

As expected this led to more volatility in the markets with the S&P 500 dropping about 5% from the day I wrote that article to a low point on November 25.  From there it began climbing back up with good reports from the retail sector on Black Friday.  It then surged even higher on news that the Federal Reserve would work with other central banks to support the global economy.  As of today the S&P 500 is back up about 7% from that low point.

So what have we learned from all this?  Well it appears that our government leaders are incapable of agreeing on much of anything these days so don’t expect any major changes to the tax system before next year’s presidential election.  However there is one piece of legislation that seems to be gaining steam and might be resolved before the holiday break.

You might remember that last year Congress acted to reduce the payroll tax for 2011 to spur economic growth.  This reduction is set to expire at the end of the year, which would mean an increase in taxes of $1,000 for the average family.  There seems to be agreement among both Republicans and Democrats that the payroll tax cut should be extended through next year but of course they can’t seem to agree on how to pay for it.  Democrats want to pay for the cut with a surtax on those making more than $1 million a year while Republicans plan to use spending cuts to pay for it. 

I will not attempt to predict what will happen as these two political parties fight each other over the next week before they pack up and head home for the holidays.  Instead I will keep an eye on their progress; if and when they are able to pass legislation, I will post an update here.  As always, stay tuned!

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