Tax Implications of Federal Government passing Debt Ceiling Increase

The bill to increase the US debt ceiling passed both the House and Senate Monday evening.  The bill raises the debt ceiling in several increments throughout the next year and gets us past the 2012 election.  A “super committee” comprised of both Republicans and Democrats will convene to approve another 1.5 trillion in borrowing for the future, and to determine the spending cuts and tax modifications to cover this increase.  The new law that created this “super committee” and new stair step approach to raising the debt ceiling is officially known as the Budget Control Act of 2011.  Although this law currently does not spell out the tax code changes that will be enacted, but the law requires this new bipartisan committee to draft new debt reduction legislation by the end of 2011.    The words “Sweeping Tax Reform” have been mentioned, so this indicates more fundamental changes rather than simple loophole closings.  Couple this with expiring Bush tax cuts December 31, 2012, and there is good reasoning to think that we will be seeing major tax changes, if not next year, then in 2013.