Super committee failure threatens key tax breaks
Super committee deal would have made it easier for Congress to extend temporary tax breaks that are buoying the economy. The likely debacle of the super committee could trim growth by ending those tax breaks.
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UNEMPLOYMENT BENEFITS
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Unemployment insurance is a federal-state program that gives workers temporary pay substitution benefits. Through the recession and its aftermath, Congress has extended unemployment benefits up to 99 weeks.
Beginning on Jan. 1, 2012, those collecting extended benefits will begin to roll off the federal programs. By mid-February, 2.1 million people will be unable to continue on extended federal benefits, said the U.S. Labor Department.
The president has proposed more funding for unemployment insurance with reforms to the system.
JPMorgan Chase economists estimated the loss of unemployment benefits, combined with an expiring payroll tax cut, would shave 0.75 percentage point from GDP growth.
TAX EXTENDERS
Congress traditionally passes an end-of-year ``extenders'' bill that renews tax breaks that have not been permanently written into law. These provisions include an AMT ``patch,'' which would exempt middle-class workers from additional taxes.
Businesses are set to lose ``bonus'' depreciation tax write-offs for new purchases, and the tax credit for research.
Making the research credit permanent is an idea with bipartisan support in Congress and from the Obama administration. Some in Congress also want to expand it.
Such tax extenders, some say, could help shape a deal in the super committee, though others have said extenders will lapse again, as they did in 2010, and will only be renewed retroactively by a lame-duck Congress in December 2012.
Failure to approve tax extenders before the end of 2011 could hurt the economy.
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