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Washington Update

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Following its Thanksgiving break, Congress returned to Washington this week and the impending “fiscal cliff” continued to dominate the political discussions on Capitol Hill.

What is the fiscal cliff? The term was first coined by Federal Reserve Chairman Ben Bernanke, and it refers to the combination of automatic federal tax increases and spending reductions that will occur on or around Jan. 1, 2013, if Congress does nothing. Congress now has one month to negotiate an agreement to avoid massive budget cutbacks and tax increases that would take effect at the start of 2013. Many economists and politicians fear that these automatic tax increases and spending cuts could seriously damage economic growth in 2013 and beyond.

The specific components include 1) sequestration, 2) statutory discretionary spending caps, 3) expiration of the Bush tax cuts, 4) a debt ceiling increase. All these issues will hit early in the new year, and may have serious ramifications for the economy depending on how they are addressed. SHRM has been advocating in favor of extending the Section 127 employer-provided education assistance credit. Currently, section 127 is one element of the $180 billion per-year Bush tax cuts that are slated to expire at year’s end. SHRM is the co-chair of the Coalition to Preserve Employer Provided Educational Assistance (

Employers and employees are watching the debate about the payroll tax cut extension, too. The FICA payroll tax rate, which was reduced from 6.2 percent to 4.2 percent for all workers on their first $110,000 of income, is set to expire on Jan. 1, 2013, also.

To date, the major barrier to compromise has been the impasse between Democrats and Republicans over what to do with the expiring Bush tax cuts. Many Democrats, including President Obama, insist that any compromise should include allowing the Bush tax rates to expire for individuals who earn $200,000 or more annually (or married couples earning $250,000 or more annually). This past week, there were signs that the Republican opposition to tax rate increases could be softening. Republican senators Saxby Chambliss (R-GA), Lindsay Graham (R-SC), and Bob Corker (R-TN), and Rep. Peter King (R-NY) all said that they would be willing to consider new tax revenues as part of a deal that includes reform of entitlement programs, such as Medicare and Medicaid. Sen. Dick Durbin (D-IL), is a leader in the budget talks and has said that his colleagues should “bring entitlement reform into the conversation.”

Beyond the fiscal cliff issues, the House is expected on Nov. 30 to consider a bill to create a new visa program for U.S.-educated foreign nationals. The STEM Jobs Act of 2012 (H.R. 6429) eliminates the diversity immigrant visa program and shifts those visas to a new visa program for certain foreign graduates of U.S. Ph.D. programs in science, technology, engineering and mathematics fields. Despite strong support in the House, it is unlikely that the bill will pass the Senate before the end of the year. SHRM and its strategic affiliate, the American Council on International Personal, support HR. 6429 and have been advocating for its enactment.

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