Image: Obama
Jason Reed  /  REUTERS
President Barack Obama gestures as he talks about cutting the U.S. deficit by raising taxes, from the Rose Garden of the White House on Sept. 19, 2011.
By Tom Curry National affairs writer
updated 9/20/2011 10:00:43 AM ET 2011-09-20T14:00:43

In the power struggle between congressional Republicans and President Barack Obama over taxes and spending, one way to keep things clear is to focus on the timeline.

A massive increase in taxes is scheduled to take effect on New Year's Day 2013, unless Congress and Obama agree to an alternative — and there’s a lot that has to happen before that.

Here’s a timeline of what’s going to play out in the months ahead:

This year

  • Oct. 1 (which is only 12 days away): The government’s new fiscal year, FY 2012, begins. By this date, Congress must approve and the president must sign a bill to fund government operations, even if it’s a stopgap bill covering only a few weeks or months. 
  • Nov. 23, 2011: The Budget Control Act of 2011, which last month ended the debt ceiling standoff between Obama and congressional Republicans, created a Joint Select Committee on Deficit Reduction, made up of six Democrats and six Republicans.

Nov. 23 is the date by which that committee is required to vote on a report and a proposed bill specifying ways to cut cumulative budget deficits by at least $1.5 trillion between FY 2012 and FY 2021.

Story: The supercommittee on deficit reduction

A simple majority, seven of the 12 members, is sufficient to report the committee’s proposals to Congress for further action.

But if the committee does not come up with a report and a proposed bill, then the Budget Control Act would make automatic spending cuts beginning on Oct. 1, 2012.

  • Dec. 23, 2011: By this date, each house of Congress must vote on the bill recommended by the deficit reduction committee.

No amendments to the bill are allowed and, in the Senate, the debate on the bill cannot go beyond 30 hours — so using a filibuster, or dilatory debate, to kill the bill is impossible.

Of course the president has the power to veto the bill and Congress has the power to override his veto, by a two-thirds vote of both houses.

  • Dec. 31, 2011: The payroll tax reduction which Congress enacted and which Obama signed into law late last year expires on New Year’s Eve, unless Congress and Obama take action to extend it.

This tax cut — which reduced the Social Security payroll tax on workers from 6.2 percent to 4.2 percent on income up to $106,800 — is handing taxpayers $111 billion in additional income, which may be helping the economy from sinking further into stagnation.

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Obama has proposed to expand and extend this tax cut next year so that the Social Security tax on both workers and employers would be only 3.1 percent.

He has proposed to offset this tax cut partly by limiting the value of itemized deductions and certain other tax breaks for high-income taxpayers.  If Obama and Congress cannot agree on a plan for the payroll tax, then it would revert to its normal 6.2 percent level for workers on New Year’s Day 2012.

Next year

  • March-June 2012: By next spring, the Republican nominee for president will in all likelihood be chosen, with one of the contenders having won enough primaries and caucuses to make his or her nomination almost inevitable. That GOP candidate will then help define the debate with Obama over spending and tax policy.  
  • Oct. 1. 2012: FY 2013 begins. If the deficit reduction committee had not agreed to a plan in 2011, or if Congress rejected that plan, or if Obama vetoed it, then automatic cuts would start on Oct. 1, 2012.

Those automatic reductions would be spread almost evenly over the next ten years; half the cuts would come from defense spending and half from non-defense spending. According to the Congressional Budget Office, in FY 2013, the automatic cuts would reduce outlays by about $54 billion, which would be relatively small, about 1.5 percent of total federal spending.

  • Nov. 6, 2012, Election Day: The voters choose 435 House members, 33 senators, and the president.

Crucial tax deadline after 2012 election

  • Dec. 31, 2012: Unless Congress and the president take action before this date, income taxes will go up for almost all taxpayers.

For example the $1,000-per-child tax credit will be cut to only $500 per child, resulting in a large tax increase for middle-class families with children under age 17.

The standard deduction for married couples who file joint tax returns would be cut from $11,600 to $9,950 in 2013, resulting in a higher tax bill for them.

The tax rates for all taxpayers will also go up: for low-income people the income tax rate will go from 10 percent to 15 percent; the top marginal income tax rate will increase from 35 percent to 39.6 percent.

What all this means is that that interval between Election Day and New Year's Eve 2012 is shaping up as very likely the most crucial period for writing tax law in the next few years.

To avert a significant tax increase for most taxpayers, Obama and Congress would need to agree on something to replace or extend the current tax rates and credits, preferences and other tax breaks.

Whether Obama wins or loses the presidential election, he will be in a position to have a big impact on tax law. Of course if he loses the 2012 election, his successor could well propose a new tax law to the new Congress in 2013.

  • Jan. 1, 2013: This is the starting date for the new higher Medicare tax for upper-income taxpayers. The 2010 health care law created a new 3.8 percent tax on investment income for higher-income people and raised the Medicare tax on wages and salaries on individuals with income above $200,000 a year and for married couples filing jointly who earn more than $250,000 a year.

So if you look over this calendar and watch the customary gridlock in Washington, it’s not difficult to imagine the most important decisions being put off until after the American people vote in November 2012.

Given the pessimism of veteran budget and tax experts on the joint deficit committee being able to agree on a plan, it seems most likely that action won't occur until it really has to: right before end of 2012. And with tax law never really being permanent, the tax issue could be re-opened in 2013 — especially if a new president is in the White House.

© 2013 Reprints

Video: Obama announces debt plan

Explainer: The debt supercommittee

  • This 12-member panel is tasked with finding $1.5 trillion more in debt savings. It has until Nov. 23 to propose ways to reduce deficits. Those proposals must be voted on by Dec. 23.

  • Sen. Jon Kyl, R-Ariz.

    Image: Kyl
    Shawn Thew  /  EPA
    Sen. Jon Kyl, R-Ariz.

    Kyl has served in Congress since 1987, with four terms in the House before winning his Senate seat in 1994. He’s retiring at the end of 2012. He has served as Senate Republican whip since 2007. Kyl has served on the tax-writing Senate Finance Committee since 2001.

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    He has been an adept and dogged debater throughout his career, but draw scorn from Democrats when he said in April, “If you want an abortion, you go to Planned Parenthood, and that's well over 90 percent of what Planned Parenthood does.” The fact-checking site, Politifact said Kyl’s estimate was far off.

  • Sen. Pat Toomey, R-Pa.

    Image: Toomey
    Jeff Fusco  /  Getty Images
    Sen. Pat Toomey, R-Pa.

    Toomey worked on Wall Street in the 1980s and as a restaurateur in Allentown, Pa., then served in the House for three terms. In 2004, he challenged Sen. Arlen Specter, who was then a Republican, in a primary, losing by less than 2 percentage points.

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    After heading the anti-tax group Club for Growth, Toomey returned to Pennsylvania in 2010 and won the Senate nomination, Specter having left the Republican Party. Toomey won the general election by 2 percentage points over Democrat Joe Sestak, partly by attacking him for voting for the 2008 Wall Street bailout.

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    When he worked on Wall Street, Toomey told viewers in a campaign ad, “I learned that Wall Street is the last place that should ever get a taxpayer bailout.” He voted against the budget and debt ceiling deal negotiated by Senate GOP leader Mitch McConnell, arguing, “Not only will our debt grow each year under this plan, it will continue to grow even as a percentage of our economy ... I am concerned that the long-term cuts over the next decade will not materialize.”

  • Sen. Rob Portman, R-Ohio

    Image: Portman
    Tim Sloan  /  AFP/Getty Images
    Sen. Rob Portman, R-Ohio

    Although a first-term senator, Portman has worked in Washington, on and off, since his days as a lawyer for an influential Washington lobbying firm in the 1980s and then as associate White House counsel and congressional liaison for President George H. W. Bush, starting in 1989. He served seven terms in the House, beginning in 1993, and then did stints under President George W. Bush as U.S. Trade Representative and as budget director.

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    In last fall’s election, Portman easily defeated an underfunded Democratic opponent, getting 57 percent of the vote – this in a state which Barack Obama had won in 2008 with 51 percent. He brings a deep knowledge of both politics and budget details to the committee.

  • Sen. Patty Murray, D-Wash./Co-chair

    Image: Patty Murray
    J. Scott Applewhite  /  AP
    Sen. Patty Murray, D-Wash.

    Murray, as the self-described “mom in tennis shoes” and with scanty political experience, won her Senate seat in 1992 and has proven to be a durable politician and a skillful member of the chamber's Appropriations Committee.

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    Despite her re-election race last year being rated a tossup in late summer, she defeated Republican opponent Dino Rossi, winning 52 percent of the vote. Some reform groups have criticized her for serving on the deficit reduction committee while she is chair of the Democratic Senatorial Campaign Committee, the fundraising and candidate recruiting arm of her party. But Murray’s response hearkens back to her “mom in tennis shoes” persona: "Multitasking is something every mom knows how to do."

  • Sen. Max Baucus, D-Mont.

    Image: Baucus
    Robyn Beck  /  AFP - Getty Images
    Sen. Max Baucus, D-Mont.

    Although rarely seen on television and not given to flamboyant speechmaking, Baucus, the chairman of the Senate Finance Committee, is one of the most powerful people in Washington. His first job in Washington was in 1967 as an attorney for a now-defunct federal agency, the Civil Aeronautics Board. Baucus won a House seat in 1974 in the wake of the Watergate scandal and was elected to the Senate in 1978.

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    Since 2001, with one interruption when Republicans were in control of the Senate, he has chaired the Finance Committee, playing decisive roles in writing the 2001 tax cuts into law and in designing last year’s health care overhaul.

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    Last year, he served on the Bowles-Simpson deficit commission, but voted against its recommendations, such as raising the eligibility age for Social Security retirement benefits and raising the gasoline tax, which he said “would hurt people in states like Montana who often have to travel long distances.”

  • Sen. John Kerry, D-Mass.

    Image: John Kerry
    Mian Khursheed  /  REUTERS
    Sen. John Kerry, D-Mass.

    Democratic presidential nominee in 2004, Kerry brings the perspective of a party leader and a 26-year Senate veteran. He has served on the Senate Finance Committee for many years and was a strong advocate of President Obama’s health care overhaul. He tried last year to design climate change legislation in partnership with Sen. Lindsey Graham, R-S.C., and Joe Lieberman, I-Conn., contrasting it with the health care bill. "Health care never, ever became bipartisan,” he said. But in end, Kerry’s effort couldn’t gain enough momentum.

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    He complained shortly before the 2010 elections that Republicans were creating “a period of know-nothing-ism in the country, where truth and science and facts don't weigh in. It's all short-order, lowest common denominator, cheap-seat politics.”

  • Rep. Jeb Hensarling, R-Texas/Co-Chair

    Image: Hensarling
    Mark Wilson  /  Getty Images
    Rep. Jeb Hensarling, R-Texas

    The Texan is probably the most conservative member of the joint committee. He opposed the 2008 Troubled Asset Relief Program which bailed out Wall Street firms, saying TARP was “a step down the slippery slope to socialism.”

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    In the 1990’s, he served as an aide to Texas Sen. Phil Gramm, helping run the National Republican Senatorial Committee. Last year, he served on the Bowles-Simpson deficit commission, but voted against its recommendations which included tax increases (by phasing out deductions and credits) and reductions in entitlement spending. Explaining his “no” vote, Hensarling said, “If I believed that the increased revenue would actually be used for deficit reduction, you know, I might reluctantly come to the table ... .” But he said when he looked at Reagan’s agreeing to tax increases in 1982 and George H.W. Bush’s tax reversal in 1990, “It just seems to me that somehow the spending restraint never quite materializes, and yet the increased revenues do, and it seems like the increased revenues simply chase more spending.

  • Rep. David Camp, R-Mich.

    Image: Camp
    Harry Hamburg  /  AP file
    Rep. David Camp, R-Mich.

    Chairman of the House Ways & Means Committee, which writes tax law and runs the entitlement programs (Medicare, Social Security and Medicaid), Camp is a 21-year House veteran. Like many other members of Congress, Camp worked on the Hill as a staffer — in his case, as chief of staff in the 1980s for the Republican who once held the same seat he now holds.

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    Neither flashy, nor particularly charismatic, Camp is a wonkish, detail-oriented legislator. He voted for the 2008 financial sector bailout and the auto industry bailout, but is staunchly conservative on most issues. President Barack Obama carried his Michigan district with 50 percent of the vote in the 2008 election.

  • Rep. Fred Upton, R-Mich.

    Image: Upton
    Chip Somodevilla  /  Getty Images
    Rep. Fred Upton, R-Mich.

    Of the six Republicans serving on the committee, Upton is the only one who might be called "moderate" or who has occasionally deviated from the party line on a major issue (he opposed President Bush’s 2007 Iraq troop surge). After the 2010 election gave Republicans control of the House, some conservatives tried to block Upton from becoming chairman of the Energy and Commerce Committee.

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    FreedomWorks, a group headed former House Majority Leader Dick Armey, assailed his votes to bail out the auto industry and financial firms. "He has consistently been one of the least fiscally conservative Republicans in the House," FreedomWorks Max Pappas told Congressional Quarterly. But Upton, an ally of Speaker John Boehner, prevailed. Like fellow committee member and fellow Michigander Dave Camp, Upton has been on Capitol Hill for decades, having won his seat in 1986. Before that, Upton worked as a staffer for Rep. David Stockman, and then went with Stockman when he became President Ronald Reagan’s budget director in 1981. Obama carried his district with 54 percent of the vote in the 2008 election, but Bush won it in 2004 with 53 percent.

  • Rep. James E. Clyburn, D-S.C.

    Image: Clyburn
    Chip Somodevilla  /  Getty Images
    Rep. James E. Clyburn, D-S.C.

    Clyburn, first elected to the House in 1992, served as Democratic whip when his party had the majority from 2007 to the end of 2010. He represents one of the nation’ poorest and most heavily Democratic congressional districts. After the 2010 GOP wave, Clyburn was left as the only Democrat in his state’s six-member congressional delegation.

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    Referring to the deficit and the national debt, Clyburn told a South Carolina newspaper just before his appointment to the deficit reduction committee, “Entitlements aren’t causing these problems. This is just blaming poor people ... when fat cats in the upper 2 percent (of Americans) are getting tax cuts.”

  • Rep. Xavier Becerra, D-Calif.

    Image: Beccerra
    Chip Somodevilla  /  Getty Images
    Rep. Xavier Beccerra, D-Calif.

    Elected in 1992, Becerra represents a district in Los Angeles which President Obama won in 2008 with 80 percent of the vote. He serves on the House Ways & Means Committee, and also served on the Bowles-Simpson deficit commission, but voted against its recommendations, complaining that the deficit and debt had been created mostly by President Bush and Republicans in Congress.

    “We cut taxes for the wealthy in a time of war and recession and never paid for it,” he said. He also said, “We cannot balance the federal budget with 15 million Americans out of work.” And he contended that “short-term deficits, incurred for policies that promote economic recovery and investment, are not incompatible with responsible, long-term deficit reduction.”

  • Rep. Chris Van Hollen, D-Md.

    Image: Van Hollen
    Manuel Balce Ceneta  /  AP
    Rep. Chris Van Hollen, D-Md.

    Senior Democrat on the House Budget Committee, Van Hollen is perhaps the House Democrats’ most ubiquitous spokesman on national television, rarely missing a chance to do battle with Republicans. He chaired his party’s House campaign committee — in both good times for Democrats (2008) and during the 2010 election debacle.

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    He opposes short-term deficit reduction, saying, “This focus on the near term on just cutting, cutting, cutting is actually the opposite course that we should take. We need a long term plan to reduce the deficit. But in the short term it is counterproductive to make these deep cuts.”


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