In the latest round of negotiations, House Speaker John Boehner, R-Ohio, has conceded raising taxes on Americans earning more than $1 million, while President Barack Obama has revised upward his income threshold for 2013 taxes hikes from $250,000 to $400,000 a year.
As politicians work to find a solution in the eleventh hour, others are examining the situation closer to home. Thursday, Cartersville financial planner Josh McWhorter of Black Oak Asset Management is hosting a conference call, open to the public, on the possible implications of the fiscal cliff.
“We’re trying to get around to see all our clients, but we’ve had so many questions we decided this might be a good way to get the message out,” McWhorter said. “If you tune into the news and you hear one story, then flip the channel and hear another story on the same topic. I think people are just wanting answers and trying to figure out what they should be doing now to protect themselves from 2013.”
Fiscal cliff is a term coined for the simultaneous expiration of tax breaks, tax increases and spending cuts predetermined to take effect Jan. 1, 2013, to combat escalating debt levels of the U.S. government.
McWhorter, for one, sees a silver lining as the fiscal cliff, as intended, would impact the nation’s growing debt. It already has acted as an incentive for lawmakers to work through a lame-duck session toward some form of compromise. McWhorter also feels that a resolution will be met, but when and how effective it will be, is another question.
“This is something I actually try to share as a positive,” McWhorter said. “The fiscal year deficit is estimated for 2013 to be about $1.17 trillion, and under the fiscal cliff scenario, that deficit is going to range somewhere between $550 [billion] to $580 billion. So it is going to cut it down quite a bit and that is a positive that comes out of this, but there are a lot of cuts in a lot of different places that will probably affect a lot of different people across the nation from the spending side and then in the process, we’re all going to be paying higher taxes because of it.
“If I had to guess, I think something is going to get done. Whether or not it’s just a facade to mask the underlying issues or if it’d actually be beneficial for the economy is yet to be seen. But I think they are going to get something done and it’s even possible that they do something next year that is retroactive back to the first of the year in some cases. If the clock strikes midnight, it doesn’t mean the end of the line, but I wouldn’t be surprised if we see something done before the end of the year.”
While McWhorter stresses that the fiscal cliff would not directly or immediately affect Social Security, Medicaid or federal wages — areas of great concern to many households — nonprofit executives are desperately trying to raise awareness for a proposal to reduce tax incentives for charitable giving.
“One of the challenges is, this changes minute by minute,” said David Aft, executive director of the Northwest Georgia Community Foundation, referring to the fiscal cliff negotiations. “With regards specifically related to charity, there will be two or three key areas where changes are made to the tax code or the deductibility related to charitable donations. These are broad areas and I don’t know the details, but there is consideration being given to either putting a cap on the total amount of donations you can deduct or have those phase out in relation to income.
“Right now, the effect that will have on charitable giving will probably be felt by the wealthiest taxpayers.”
The other area Aft sees in danger of changing is the use of charitable giving as an offset for estate tax. Just as many of the tax break expirations, the possible changes for estate tax deductions originated with Bush-era tax cuts.
While he expects changes to be made, Aft does not expect a comprehensive deletion of giving incentives. Complete removal of these incentives would, however, be detrimental to nonprofits and he urges readers to call their federal representatives if they feel strongly about the issue.
“From my perspective, I could not imagine them completely abolishing the charitable benefit from the tax code. That would be disasterous for small community organizations and those that have always received a great deal of public charitable support,” Aft said. “I can’t imagine, even in the confoundedness of Congressional activity, that they would do that, but I do expect some changes and I encourage your readers to do some research.
“Nothing is safe under the sun, and at this stage I would encourage people to reach out to their congressmen, reach out to the White House, reach out to anybody.”
For congressional contact information, see the Voices page on 4A of The Daily Tribune News.
To participate in Thursday’s conference call from 7 to 8 p.m., dial 877-216-1555. When prompted, dial passcode 616071, followed by the # sign. For more information, call Black Oak Asset Management at 770-382-5792.