Plus, taxpayers might never have to ante up. The Treasury Department sets withholding tables that determine how much tax comes out of Americans' paychecks. It could hold off raising the withholding if a deal seems to be in the works, said Roberton Williams, a senior fellow of the private Tax Policy Center.
Both Republicans and Democrats say they don't want middle-class taxpayers to pay higher tax rates. They disagree over whether to let tax rates rise on individual income above $200,000, as Obama wants.
Other far-reaching tax changes are more likely to go ahead in January. For example, although Obama proposes extending the temporary Social Security payroll tax reduction, support for that has been weak. So more money might start coming out of workers' pay, whether or not a fiscal cliff deal is reached. That's another $1,000 over the year, or a little more than $19 per week, from a worker making $50,000.
As for the sequester, the White House can direct the Pentagon and federal agencies to husband their resources for a while and hold off on some spending cuts while negotiations continue."The more there's an anticipation that there's actually an agreement in the works, the less of an impact any of this should have," said Chad Stone, chief economist for the liberal Center on Budget and Policy Priorities. He argues that it's OK to miss the fiscal cliff deadline if necessary to achieve a well-designed agreement. ___ FEBRUARY What might finally get procrastinators moving if nothing else has? Fear of the United States defaulting on its debts for the first time ever. Unless Congress acts, the government is expected to hit its legal borrowing limit of $16.39 trillion by the end of December. Treasury Department maneuvers should hold off a default for a couple more months, until late February or early March, private economists say.