With U.S. going over fiscal cliff, Texans look ahead to possible impact

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by BRAD WATSON

WFAA

Posted on December 31, 2012 at 7:50 PM

DALLAS, Texas -- As the nation counts down to 2013, lawmakers in Washington are counting down to the fiscal cliff.

The U.S. House of Representatives will not vote Monday night, missing the midnight deadline to avert the fiscal cliff. While that deadline will pass without a deal, passage of legislation by the time a new Congress takes office at noon on Jan. 3 would minimize or eliminate any inconvenience for taxpayers.

Under the Senate's emerging bi-partisan plan, tax rates go up for individuals making $400,000 and households making $450,000. There also would be an increase in the estate tax.

But the sticking point continues to be massive spending cuts.

Millions of Texas families could be taking a tax hit if no deal that gets enough votes.

At the Sal Y Pimienta Cafe in Mesquite, owner Art Nova hopes Congress and President Obama can serve up a fiscal cliff deal to extend the Bush tax cuts to middle-class families, because if they don't, it's bad for business.

"Well, of course [people would] be eating at home more often, they wouldn't come out as often -- it's just a cycle, if you will," Nova said. "The economy goes around when people have money to spend."

Neither Democrats nor Republicans have the appetite for a middle class income tax increase.

In Texas, that would mean 8.7 million middle class families would get an income tax hike, according the White House National Economic Council. For the median income Texas family of four earning $65,900 per year, taxes would go up $2,200 for 2013.

But Nova said increasing taxes on the wealthy is all right with him.

"I don't think President Obama is asking for anything more than fairness," he said.

But for Texas Republicans in Congress, the hot brewing issue is a federal government that spends and borrows too much, which future generations must pay off. If taxes increase, Republicans like Rep. Michael Burgess of Lewisville, expect cuts to sweeten any deal.

"If taxes are also going up by a lot of money, I would like to be sure that money goes for deficit reduction and not to spend for the President's new priorities," Burgess said.

Timing is the priority now. The House won't vote by midnight Monday, but that doesn't mean fiscal cliff effects can't be avoided, according to Burgess.

"Most of the pieces of this could be, in fact, enforced retroactively," he said.

There's still hope for approval of the extension of the sales tax exemption that some 2.3 million Texas taxpayers file for on their federal returns. It hasn't passed yet for 2012. But Senator Kay Bailey Hutchison's office told KVUE sister station in Dallas WFAA it could be part of the fiscal cliff deal.

Even if it isn't, the next Congress could pass the exemption and apply it retroactively.

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