“Lame Duck” is often used to refer to a politician who is known to be in his or her final term of office, when constituents and colleagues look toward a successor. The historical origin of the term is attributed to eighteenth-century England where the term was used to refer to an investor who could not pay his or her debts. Both usages are apropos when referring to the current dilemma facing Congress with the extension of the “Bush Tax Cuts,” also know as Economic Growth and Tax Relief Reconciliation Act of 2001 (often informally referred to as “EGTRRA”).
In my article in this blog last May, I posed the question “What if Congress Does Nothing.” It’s almost seven months later and Congress has, in fact, done nothing with regard to the many provisions of EGTRRA that will expire on midnight on December 31, 2010.
Congress returned from the holiday break this week and congressional leaders met with President Obama yesterday to discuss the tax expiration dilemma. Each side has appointed several negotiators to try to find a compromise. Those negotiations are taking place against the backdrop of a still-divisive post-election climate with and federal deficits continuing at an unprecedented level.
What will happen now? While my guess here is akin to a blind bet at a Vegas gaming table, I believe that Congress may agree on a compromise proposal to extend all of the EGTRRA tax cuts for another two years. As to the estate tax, a similar compromise could be made to reinstate the estate tax exemptions and rates at 2009 levels (i.e. with a $3.5 million exemption and a 45% top rate). However, a slightly less likely possibility is that Congress will simply do nothing and pass the “tax baton” to the next Congress to deal with in early 2011.
