The Fiscal Cliff

On Friday, December 7th, National CAPACD and NCAPA conducted a webinar featuring speakers from the White House and Congress to discuss the latest on the fiscal cliff.  

In case you missed it, please click here to view the webinar in its entirety.

 
The “fiscal cliff” is a combination of expiring tax cuts and across-the-board spending cuts (“sequestration”) scheduled to take effect on January 1, 2013. If a deficit reduction compromise is not reached by January 1st, automatic cuts will dramatically scale back federal domestic programs, threatening the social safety net for millions of American families. Further, a series of tax cuts is also scheduled to expire at the end of the year, threatening middle class families with an average annual tax increase of $2,000. These two components – steep spending cuts and abrupt tax hikes – would undermine our nation’s economic recovery while needlessly putting struggling families at risk.  While deficit reduction should be a priority for Congress and the Obama Administration, it cannot be achieved at the expense of lower income Americans. 
 
Tax Increases
 
One component of the “fiscal cliff” is the expiration of a series of tax cuts that would increase taxes for almost 90% of all Americans. This includes ending both the Bush and Obama-era tax cuts, the estate tax cut, the payroll tax cut enacted earlier this year, and various annual extensions including adjustments to the Alternative Minimum Tax.  If Congress fails to act, middle income American households would see an average tax increase of more than $2,000.  
 
While every income level would see an overall increase in taxes, lower income families and small businesses would bear a disproportionate share of the burden. Lower income families already pay a higher percentage of their income in taxes, putting additional strain on families at a time when unemployment and foreclosure rates remain high.  Further, small businesses and microenterprises would see their own share of tax increases, burdening many of the economic drivers in our communities.
 
Imposing such an abrupt, significant burden on American families and businesses could undermine and reverse the recovery effort. When paired with dramatic reductions in federal spending due to sequestration, these tax increases are potentially disastrous. 
 
For more information:
For more information on the tax component of the fiscal cliff, The Tax Policy Center has produced a summary of the individual tax increases and their estimated effects:
 
Toppling off the Fiscal Cliff: Whose Taxes Rise and How Much?
 
 
Sequestration
 
The Budget Control Act (BCA), passed by Congress in August 2011, raised the national debt limit to ensure that the United States would not default on its debt obligations. Included in the BCA, however, was a mandate for across-the-board cuts if Congress is unable to develop a deficit reduction plan before reaching the next debt limit. These cuts, also known as “sequestration”, would be applied to both defense and non-defense spending, totaling more than $1 trillion over ten years.  
 
Sequestration cuts would be far reaching and would impact nearly every discretionary program in the budget. This includes significant, across-the-board cuts to a variety of domestic programs for housing, labor, health, research, education, and more. The only programs exempted from sequestration are Social Security, Medicaid, civil and military employee pay, and veterans’ benefits.
 
Sequestration Effects on Housing and Community Economic Development
 
Sequestration will put at risk many key community economic development programs that serve low income communities. The Department of Housing and Urban Development (HUD) would see an overall cut of more than 8% to housing and community development accounts. The Economic Development Administration of the Treasury and rural development initiatives in the Department of Agriculture would also see a similar 8%+ cut.
 
The effects of sequestration on the nation’s affordable housing stock would be dire. 185,000 households would lose rental assistance in 2013, while cuts to Community Development Block Grants and HOME funds would severely limit financing opportunities for community development projects. The cuts would exacerbate an already growing shortage of affordable housing over the next decade.  Housing counseling agencies would also be affected in 2013 and beyond, as the HUD housing counseling program would be reduced by $5 million at a time when demand for assistance already far outpaces capacity. Finally, housing programs that assist specific populations like Native Hawaiians, Native Americans, and the homeless would be cut back, reducing available services to oftentimes overlooked communities.
 
For more information:
The Campaign for Housing and Community Development Funding (CHCDF) has compiled a fact sheet on the direct effects of sequestration on critical HUD housing programs:
 
Impact of Sequestration: More than Two Million Americans Face Negative Impacts of 2013 Cuts to Affordable Housing and Community Development Programs
 
The Center for Budget and Policy Priorities has calculated the effects of sequestration on HUD's grant and voucher programs:
 
Deficit Reduction Deal Without Substantial New Revenues Would Almost Certainly Force Deep Cuts in Housing Assistance
 
Estimated Cuts in Housing and Community Development Block Grant Funding Due to Sequestration, 2013

Estimated Cuts in Federal Rental Assistance Due to Sequestration, 2013
 
 
Additional Resources and Advocacy Tools

Campaign for Housing and Community Development Funding - Breakdown of HUD Program Cuts
Impact of Sequestration: More than Two Million Americans Face Negative Impacts of 2013 Cuts to Affordable Housing and Community Development Programs
 
Center for Budget and Policy Priorities
Deficit Reduction Deal Without Substantial New Revenues Would Almost Certainly Force Deep Cuts in Housing Assistance
 
Center for Budget and Policy Priorities (1-pagers, both included in report above)
Estimated Cuts in Housing and Community Development Block Grant Funding Due to Sequestration, 2013

Estimated Cuts in Federal Rental Assistance Due to Sequestration, 2013
 
Half in Ten Campaign Poverty Report
The Right Choice to Cut Poverty and Restore Shared Prosperity
 
Congressional Budget Office 
Economic Effects of Policies Contributing to Fiscal Tightening in 2013
 
Office of Management and Budget
OMB Report Pursuant to the Sequestration Transparency Act of 2012

Tax Policy Center
Toppling off the Fiscal Cliff: Whose Taxes Rise and How Much?