Washington Watch - February 6, 2013


Washington Watch - February 6, 2013

Budget Woes Continue to Hamper Congress

Automatic, across-the-board spending cuts are set to take effect on Mar. 1, 2013, encompassing an estimated $1.2 trillion in domestic and defense spending over 10 years, slashing indiscriminately federal programs. The President called on Congress this week to act immediately and avoid a last-minute showdown that would potentially cause further damage to the recovering economy, and express support for a broad package that would be a mix of tax changes (closing loopholes that benefit the wealthy and specific industries) and spending cuts.

Ahead of President Obama’s State of the Union address, calls to find a solution to the looming cuts will only continue to grow. Additionally, funding for the federal government runs out at the end of March, and any talk of a federal government shut-down could damage economic recovery and growth. It is proving to be a messy start to the 113th congress.

New Projected Cost of Health Care Reform Law: $1.3T

New estimates from the Congressional Budget Office (CBO) put the cost of the health care reform law at $1.3 trillion. CBO also indicated the number of individuals participating in the state health care exchanges will top 26 million – 500,000 more than they estimated last summer.

The report raised questions as to the readiness of the state insurance exchanges, which are set to launch on Oct. 1, 2013. This has been a growing concern in past weeks, as both the estimated number of enrollees’ and the number of states that are passing on the option of establishing their own exchange increase. The federal exchange will serve as a catch-all for those states that decline to establish their own state-based exchange.

Finally, CBO estimates that penalties resulting from disobeying the individual mandate will result in revenue in excess of $11 billion, thus off-seeing the costs of health care reform.

Tax Reform Still Priority for Ways & Means Committee: Hearing on Charitable Contributions Set

The House Ways and Means Committee recently announced an upcoming hearing on the itemized deduction for charitable contributions. The Committee is focused on putting forth a comprehensive reform of the tax code, outside of the changes made at the end of 2012 related to the individual tax rate and estate tax.

The hearing, scheduled for Feb. 14, 2013, will focus on possible limitations of the charitable contribution deduction, a proposal that has been floated in recent years as a mechanism to close tax loop-holes that benefit the wealthiest of Americans.

Those opposed to placing any limitations on the deduction argue that it will adversely affect charitable giving that is possibly motivated by the tax benefits an individual receives.

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