To avoid the so-called fiscal cliff, the combination of tax increases and spending cuts that will take place on Jan. 1, will take the coordinated efforts of both houses of Congress and the president.
On Monday, President Obama proposed increasing taxes from current levels for those who make $400,000 or more in annual adjusted gross income.
This follows the proposal from Republican House Speaker John Boehner to raise taxes for those earning $1 million or more, accompanied by entitlement cuts.
Three additional aspects of the fiscal cliff that get little attention would be particularly damaging.
First, the alternative minimum tax will be fully effective for 2012 if Congress doesn't pass a "patch," as it has in previous years.
This means that 28 million more Americans would owe $92 billion of extra taxes on their 2012 income. The current AMT exemption is $33,750 for single filers and $45,000 for married couples filing jointly, so you don't have to make that much to be hit by the AMT.
Because it has been assumed that Congress will adjust the AMT as it has in the past, these tax payments have not been withheld from people's wage and salary income along with other federal taxes. Come April 15, affected taxpayers will owe an average of $3,286 in payments to the IRS on their 2012 income, according to my calculations.
Second, the federal government's reimbursements to physicians who treat patients on Medicare will be cut by 27 percent if Congress doesn't act. Reducing physicians' rates will lead more doctors to drop Medicare patients or refuse to accept new ones. This would lead to a shortage of care for the elderly or force them to pay more for doctors' care.
Third, the estate tax would rise. Exemptions of $5 million now would fall to $1 million. Tax rates on estates valued in excess of the exemption, now 35 percent, would jump to 55 percent. If farmers and other small-business owners die in 2013, their farms or businesses, or parts of them, may have to be sold to pay taxes -- unless the family has estate lawyers to shelter assets from Uncle Sam.
These are just three of many examples of taxes that are scheduled to increase next year. These other taxes don't receive the sound bites of the marginal income tax rates, but the scheduled increase in these taxes will adversely affect millions of Americans.
In the absence of an agreement, Boehner's Plan B is to pass his legislation through the House and see if it becomes the law of the land. The legislation would include fixing the AMT and the estate tax, but not reimbursements to Medicare physicians.
Obama has been insisting on higher taxes on the strength of having won the presidential election.
But, just as Obama was re-elected for a second term, House Republicans were re-elected to a majority -- albeit a smaller one. Whether Obama likes it or not, Boehner will be speaker of the House for another two years. Tax bills, by the Constitution, must originate in the House -- not the Senate, much less the White House.
What is in play now is where tax increases will start, presumably above $400,000 of adjusted gross income, and what the new rates will be.
Also at issue is whether to raise the tax rates on long-term capital gains and dividends, now 15 percent. If Congress does not act, top rates on capital gains will rise to 24 percent and on dividends will rise to 43 percent.
All of the tax code changes needed in the next two weeks will require a miracle. Perhaps Santa and his helpers have some spare time.