Capitol Hill is sure to see some new faces next January after today's election, but no matter who wins or loses, a lame duck Congress goes back into session in two weeks and it will have more than a month to decide on a number of issues that will impact your financial well-being.
Just how many of these matters will come to a vote is anybody's guess, and some will probably be put off until the next Congress, but let's take a look at what the current members of the House and Senate could vote on.
Tax cuts
Perhaps the most important to all Americans is whether there will be an extension of the Bush tax cuts. Democrats and Republicans say they are in favor of extending them but they disagree on who should get them. The tax cuts are set to expire on December 31 and if Congress waits too long, they will go away on their own and any vote to extend them would be retroactive.
By now the country knows that Republicans want to extend them for everyone while President Obama and many of the Democrats want to extend them only for those households making less than $250,000 or individuals making less than $200,000. Recently some Democrats have said they would like to see a higher income threshold, such as $500,000.
Estate tax
The next major financial issue is the estate tax, which was allowed to lapse for the past year. Lawmakers still have not resolved their differences over just how far-reaching the tax should be.
But one thing is clear: Republicans and most Democrats don't want it to return next year at the levels set under current law.
If nothing is done, on January 1, no more than $1 million of a person's estate would be exempt from the estate tax. That's well below the $3.5 million exemption in place last year. And the top estate tax rate would jump to 55%, up from 45% in 2009.
If Congress does manage to reach consensus, the exemption level is most likely to fall between $3.5 million and $5 million, while the top rate will be set somewhere between 35% and 45%.
AMT
Then there's that worrisome alternative minimum tax, or AMT. If Congress doesn't act, 27 million taxpayers will be hit with the AMT when they file their 2010 returns. According to the Tax Policy Center, lawmakers have enacted annual AMT "patches" since 2004. But the patch, which costs about $70 billion a year, has never been paid for.
Although the AMT is universally disliked, it's unlikely lawmakers will get rid of it because of its revenue potential. Also, it is often included in federal budget projections and makes future deficits look smaller than they really are.
There are a number of bipartisan-supported tax breaks that regularly get extended and they been held up repeatedly this year. These include research and development credit and the option to deduct one's state and local sales taxes on the federal tax return. It's possible that the tax break package will be included in a mega-tax bill that incorporates the Bush tax cut extensions, the AMT patch and new estate tax parameters.
The problem is that with so much tax legislation, there would be fights over whether such a bill needs to be paid for and, if so, where to raise other revenue or cut spending to do so.
Unemployment benefits
A more immediate issue that needs addressing is a program that allows jobless workers to file for extended federal unemployment benefits and this expires November 30. Under that program, jobless workers have been able to qualify for up to 99 weeks of benefits. Unless Congress acts, roughly 2 million jobless workers will lose their federal unemployment benefits in December, according to estimates from the National Employment Law Project.
Medicare
There are issues around Medicare that also need addressing. In December, the Medicare reimbursement rate for physicians will be cut by 21% and by 1% to 6% in future years if Congress doesn't implement a so-called "doc fix" to stave off the rate cut.
Lawmakers have implemented the "doc fix" 10 times in the past eight years, four of them this year alone. It would be expensive to implement a permanent fix or even a five-year fix. There is concern that physicians will stop serving Medicare patients if their fees are cut so drastically. Critics of the reimbursement rate say it should be overhauled to better reflect the true cost of care.
The budget
Then finally, it's the national budget. If Congress doesn't act, the government shuts down on December 4. That's unlikely to happen because all congress has to do is pass another band-aid measure to keep the government funded temporarily or actually pass the remaining spending bills slated for fiscal year 2011, which began on October 1.
It's not unusual that Congress would go several months into a new fiscal year without a real budget. In fact, late federal budgets have been standard operating procedure for the past 35 years.
