Capitol Hill Update: Fiscal Cliff

January 1, 2013

By Ralph E. Winnie, Jr., National Correspondent, Federal Allies News


Update on Fiscal Cliff and What it Means for Small Business: According to President Barack Obama, an agreement to avert the fiscal cliff of automatic tax increases and spending cuts appeared to be “within sight”. As per remarks made by Senator Mitch McConnell, Senators were very close to a deal, having worked out an agreement on taxes. However, according to members of Congress, the House of Representatives will not be voting on any plans to avert the fiscal cliff tonight. The impact on small business could be substantial depending on the kind of deal reached between the two parties. The Democrats have agreed to raise the income threshold for tax increases to $450,000 a year (couples) from the prior $250,000, While the Republicans are insisting on a $550,000 threshold, arguably this might be considered a substantial tax cut for the majority of Americans, including many small and medium size enterprises relative to the rates that would otherwise take effect on January 1st. The Democrats have insisted on raising capital gains and dividend taxes to 20% on households over $250,000 and reducing some of the allowable deductions. While it may boost dividend taxes to 40% on incomes over $250,000, the impact on small business will have to be closely examined over the next couple of months to evaluate its impact and to determine what recommendations Federal Allies could provide to its membership. The Democrats have agreed with the Republicans to keep the threshold for taxable estates at 5 million with a tax rate of 35% above that level. It can be argued that this is a massive tax cut over current law in which the threshold will drop to 1 million at a much higher rate. Given that it can be argued that the latest proposal by the Democrats would permanently protect middle-class households from the Alternative Minimum Tax, this would have a significant affect on the operation and profitability of small and medium size enterprise. More details to follow in the coming month as neither party has initially laid out details on how this would work. Federal Allies is dedicated to providing guidance to its membership on how these new rules will operate. Given that the Democrats’ offer would delay the “Sequester” until 2015, the cost would be an estimated 200 billion. This would avoid the cuts to the military budget that Republicans want to avoid since they insist that these cuts would ultimately impact small and medium sized companies involved in defense contracting and procurement. Federal Allies remains committed to all of its members that it will closely monitor the sequester debate and how it will impact small business procurement in the next few months. The Republicans want current spending cuts to offset the postponement of the sequester spending cuts. This postponement will cost 200 uillion over two years and the postponement of the cuts will avoid a shock to an already weak economy. On the tax side, the United States will be getting a massive tax cut that will take place on January 1st. The current low income and investment tax rates for 98% of the country, including the majority of small and medium size enterprises would be extended. Both Republicans and Democrats are debating whether the threshold for a modest income tax increase should be $450,000 or $550,000 and the impact on small and medium size enterprises. Finally, The proposed deal appears to be a benefit to the economy as the postponement of most of the tax hikes under the sequester, as well as the spending increases, would preserve the status quo and appear not to severely hamper small and medium size enterprises in their effort to grow. While the deal would likely boost the deficit over the next two years, neither the Republicans or the Democrats maintain that the Fiscal Cliff would be an acceptable alternative to these proposals.

Federal Allies News November 2012

November 1, 2012

How to Sequester the Fiscal Cliff

Across-the-board federal budget cuts and tax increases required by Sequestration start January 2, 2013, the day before the 113th U.S. Congress convenes, unless the President and 112th U.S. Congress agree to $1.2 trillion in budget cuts, revenue increases, or amend The Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985.

On Capitol Hill, the House of Representatives has passed plans that would reduce entitlement spending and reduce the federal civilian workforce through attrition, and the Senate has failed to pass a plan.

The White House plans to veto any measure that does not increase revenues.

Federal agencies plan to reduce the scope and quantities of contracts, to slow the work, reduce new contract awards, extensions and options, and to renegotiate downward rather than immediately terminate any contracts.

Contractors are focused on agency reductions and recoveries. Funding already obligated on your federal contracts should not be affected.

Federal Allies maintains a vigilant watch on Sequestration and on a wide range of other business development, legislative, and regulatory flexibility issues affecting the federal contractor community. We invite comment from our business, agency, and Capitol Hill colleagues as we do our part to shape the collective future.

The world of federal government contracting can seem daunting. And the value of having a guide to walk you through the process, a ready-made network in Washington, D.C. and introductions to establish personal relationships, is priceless, now more than ever.  If you are not already active with the Federal Allies Network, get involved! We look forward to building programs around your needs, both business development and policy.

After the November 6 election, Congress returns for a week to decide how the deficit is pushed back or how a down payment on the debt will be made. How will Treasury respond? Join us as Federal Allies visits Congressional offices to say good-bye to many and casts our collaborative culture and nature upon newly-elected officials. We hit the ground running on November 7. If you would like to go with us to meet the 113th U.S. Congress, call (571) 217-0823.

How to Succeed in Federal Contracting through U.S. Government Mentor-Protégé Programs

On December 12, 2012 at Tysons Corner, Virginia, Federal Allies Institute offers a 7:30 a.m. to 11:00 a.m. seminar with Q & A to review and value 12 federal agency mentor protégé programs, which should prove a great one-stop opportunity on the subject. Visit for more information and to register.

Corporate Ethics

Corporate Ethics is a subject of growing concern in federal acquisition. Contracting officials are increasingly looking at adverse actions against companies that commit unethical acts, including disbarment from future federal acquisition activities and criminal penalties. Because of this, corporate ethics is becoming something that evaluators look at during the acquisition process. How can they tell if a company practices ethical business activities, especially a small business without a long track record? Federal Allies plans to offer a solution in 2013.

Chapter Establishment

Federal Allies Institute, a private-sector self-sustaining association, continues to capture the interest of small business groups and economic development authorities from around the country. We welcome the opportunities to meet in Washington, D.C. with delegations flying in from Austin and Tulsa and welcome the recent interest from Los Angeles. We are available to make introductory presentations in your home town, so feel free to send Federal Allies an invite.

David T. Boddie, Executive Director

Federal Allies Institute