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Estate Tax May Be Part Of Talks; Down To The Wire; Countdown To 2013; Benghazi Report Faults State Department; Nine Dead In Charter Bush Crash; Newtown Shooter's Body Claimed; Funeral For Firefighters Killed In Ambush; Gang Rape Victim Cremated In India; Health Setback For Chavez; Senator Proposes Relief For Tax Increases; McConnell: We Are Very Close To A Deal; Parents May Be Caught In Bind
Aired December 31, 2012 - 14:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JOE JOHNS, CNN ANCHOR: A compromise on the estate tax may be part of a last minute deal in the fiscal cliff. We're talking about how much money you can leave for your loved ones after you die. Republicans want to extend the current estate tax that tops out at 35 percent and affects the estates worth $5 million or more.
Without a deal, state tax rates would jump 55 percent maximum and would affect estates worth $1 million or more. The outline of the deal that just has been floated would set the estate tax at 40 percent and the threshold at $5 million.
Now let's bring Christine Romans in to make sense out of all of this. Christine, what do the numbers mean to real people?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, what it means, it is a victory politically for Republicans and it means many Republicans have said for a small business owner, small family farmers, people who have worked hard and amassed an estate, it means that they won't have to pay much more than they currently do for an estate tax.
This is a true compromise here because this is what you have now. This is -- you have on estates larger than $5 million and change, you have a 35 percent tax rate on the size of the estate above $5 million.
If we went over the cliff, the demographic to show you, this if we went over the cliff, you're going to see an estate tax of 55 percent on the part of the estate that is larger than a million dollars.
The compromise here is a 40 percent estate tax with 5 -- the first $5 million of the estate exempt. So a real win here for Republicans who were worried about the estate tax reverting to the $1 million exemption at 55 percent rate.
JOHNS: Now, can you just sort of explain -- can you sort of explain to people what the estate tax is, why it has been called the death tax and why Republicans over years have just fought tooth and nail to try to reduce this thing.
ROMANS: Because Republicans say it rewards success. I mean, this is something we have heard again and again about the capital gains taxes, and other taxes on investments, they say it rewards success.
Now people like Warren Buffett and others who are on the left side of the argument, they say, look, living in this country is -- the -- this country has given them the ingredients to be successful, and, you know, should have to give back for that.
There are two very different philosophies about the estate tax. At least here, in the beginnings of the frameworks of the still moving target that is this deal, let's be clear about that, looks like 40 percent and $5 million, a slight increase in the estate tax, but it wouldn't be as bad as Republicans had feared if we went over the cliff.
JOHNS: I mean, there is also that question of just being able to send what you've made in your lifetime as an inheritance on to your next generation or giving it to the government, right?
ROMANS: That's exactly what it is. I mean, it is a fight that they have had sort of -- this is a perennial fight the estate -- the death tax. Even the language used about is very coded language. But what Republicans have long said is that the estate tax is something -- the death tax, whatever you want to call it, is something that punishes success.
DEBORAH FEYERICK, CNN ANCHOR: You know, and Christine, when it comes to keeping your money, that's what everybody wants, they want to work, they want to make money, they want to keep as much as they possibly can.
But here's something that is a little bit surprising. Some politicians are saying that plunging over the cliff, actually staying there, might be great for the stock market. Just quickly take a listen to Howard Dean.
(BEGIN VIDEO CLIP)
HOWARD DEAN, FORMER CHAIRMAN, DEMOCRATIC NATIONAL COMMITTEE: I predict ultimately if we go over the cliff and stay over the cliff, six months from now the Dow will be at 15,000. You know why? The biggest uncertainty in the market is not taxes and blah, blah, blah, it is the size of the deficit. If you go over the cliff, you've done something for first time really serious about the deficit. All of a sudden the financial horizons look pretty good.
(END VIDEO CLIP)
FEYERICK: So, Christine, when you listen to that, what is your reaction, would a cliff dive be greeted enthusiastically on Wall Street?
ROMANS: I wish I could do the dean scream, right?
FEYERICK: Either one, yes.
ROMANS: That's not a main street view, mainstream or main street view on what is happening on Wall Street. In fact, all the people I've talked -- every person I talked to who is putting money on the line for clients or money on the line for themselves in the market saying that you got to have the uncertainty of the fiscal cliff out of the way and you have to have real solid progress toward deficit reduction.
Look, the irony here is that the crazier Congress acts, the more destabilizing it is for the world and the more people rush their money into U.S. Treasuries for the safety -- making it cheaper to borrow more money. So we're in this very weird, weird moment here.
Howard Dean is the first person I've heard to say that you would have the Dow at 15,000 if we went over the cliff. What most people want is to get the cliff out of the way, show serious progress toward a real budget agreement between these two parties, and get -- move forward with serious deficit reduction, but don't hurt the economy in the near term.
FEYERICK: Yes, get everything in line. All right, Christine Romans, thanks so much. We'll get back to you.
Well, we're still hours away from our New Year's countdown in the U.S. people around the world are already celebrating. This is Victoria Harbor in Hongkong. Organizers say this year's fireworks display was the biggest one they have ever had.
And check this out. That's Sydney, Australia, one of the first cities to see in the New Year, known for having one of the most spectacular fireworks displays in the world. The skies above the famous harbor bridge lighting up with about seven tons of fireworks.
Back across the Pacific, a countdown is already on for the stroke of midnight in New York's Times Square. You're looking at a test run of the traditional New Year's Eve ball drop. People finding a reason to be happy and celebrate, despite the saga playing out in Washington.
And if you don't have plans to go out, of course you can always join us here. Anderson Cooper, comedian Kathy Griffin live from New York and, of course, our Brooke Baldwin in New Orleans. They ring in the New Year with all of us. CNN's special coverage starts at 10:00 Eastern.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Hi. My name is Lieutenant J.G. Selena from Kandahar, Afghanistan. I just want to wish my friends and family from Milwaukee, Wisconsin, a safe and happy holidays, I miss you guys!
(END VIDEO CLIP)
JOHNS: We're learning new details about the deadly attack in Libya that killed U.S. Ambassador Chris Stevens and three other Americans. A bipartisan Senate report released today gives a scathing assessment of the State Department's failure to protect the U.S. consulate in Benghazi. Watch what ranking member of the committee Susan Collins had to say. (BEGIN VIDEO CLIP)
SENATOR SUSAN COLLINS (R), HOMELAND SECURITY COMMITTEE: The terrorists essentially walked into the compound, virtually unimpeded, and set it ablaze due to extremely poor security, in a threat environment that the Undersecretary of State, Patrick Kennedy himself, has conceded was flashing red.
(END VIDEO CLIP)
JOHNS: The committee also found the department relied too heavily on Libyan security guards who were known to be unreliable. This report comes after a similar scathing assessment by an independent State Department board, which led to top security official and three others at the department stepping down.
FEYERICK: And a charter bus crashed in Northern Oregon has killed nine people and injured least 26 more. The bus skidded on ice, crashed through a guardrail and tumbled several hundred feet down a steep embankment Sunday. Emergency responders, some trained in rope rescues, helped bring victims back up the highway. The driver hasn't spoken to authorities. He was severely injured in the crash.
The body of Newtown school gunman Adam Lanza has been claimed by his father. Connecticut's chief medical examiner says Lanza's body is ready for burial, more than two weeks after he opened fire on children at Sandy Hook Elementary. Lanza killed 26 people including 20 children and his mother before taking his own life.
JOHNS: The second firefighter killed in a Christmas Eve ambush has been laid to rest. The 19-year-old Thomas Kaczowka was on duty that morning so those with young children could have the holiday off. His obituary describes him as everyone's little brother who died doing what he loved.
His comrade, Lieutenant Mike Chiapperini was laid to rest on Sunday. The family said they're asking people to do acts of service in his honor. They were shot and killed while battling an out of control house fire set by the gunman.
FEYERICK: Well, her brutal beating and gang rape on a New Delhi bus sparked mass protests across India. Now the young woman they're calling "Lightning" has been cremated. The 23-year-old medical student died in Singapore where she had been taken for treatment after the attack early this month. Six suspects are charged with her murder and politicians in India are calling for the chemical castration of the sex offenders.
JOHNS: Venezuelan President Hugo Chavez is suffering from new complications as he recovers from cancer surgery. His vice president announced the medical setback after visiting the 58-year-old in Cuba. Chavez has been fighting a respiratory infection. No word yet on whether he'll be able to return to his country for the start of a new six-year term on January 10th.
Coming up next, one senator says he's got an idea that can help ease the pain if we go over the fiscal cliff. Hear his plan and whether it has got a chance.
JOHNS: Joe Johns in Washington, D.C. here where we're keeping an eye on the fiscal cliff negotiations. The president of the United States spoke a little while ago, saying among other things a deal is within sight, but not yet done. He's also been accused by some Republicans of picking a fight, with the GOP over on the House side. We'll have to see how all of that plays out.
Joining us now from Washington is Senator Joe Manchin, the Democrat of West Virginia. He's introduced a bill to phase in the looming tax increase rather than force taxpayers to feel it full force right away. Thanks for joining us, Senator.
Before we get to your proposal, let's talk a little bit about the emerging framework of a deal, source close to the negotiations telling CNN we're talking about a threshold, of preserving the bush tax cuts at $450,000 per family, with the cap of 39.6 percent on the rate.
There are also caps on itemized deductions in there, a ceiling on the estate tax at 40 percent. Can you live with all of this? Do you think your colleagues will be able to?
SENATOR JOE MANCHIN (D), WEST VIRGINIA: Well, we're going to be in caucus, I think, sometime this afternoon, Joe, and with that we just have to see it all. I heard just what you described. And, you know, right now it is getting down to the 11th hour as you know.
And they're saying that -- I guess any deal is better than no deal. We have got some Democrats saying a bad deal is worse than is going over the cliff is better than a bad deal. You have Republicans on the same end of that.
I think everybody knows the cliff is very dangerous for all of us. We should be able to avoid that. It is a shame it has gotten to this. It has. I saw it coming a couple of weeks ago. I could tell things weren't gelling the way they should have.
And I was concerned about that. And we'll get into what I talked about, which is the comeback. But the bottom line is I'll do everything I can to avoid going over the cliff. If the markets react unfavorably, if interest rates go up, everybody is affected and much more drastic way than what they're going to be.
JOHNS: Can you talk a little bit now about your own proposal? Is it basically a failsafe measure to try to cushion the blow of higher taxes? Just how would it work?
MANCHIN: Joe, basically what it was is exactly what is going to happen with the cliff hits tonight. So-called -- the Bush tax credit will all go away, and we have back to the rates across the board, of Bill Clinton's tax rates that we had, and some people argue that was most prosperous time of our country.
So with that being said, we would go back to the rates we had prior to 2001. Also, the sequestering kicks in too, which is across the board cuts, half of it coming from the defense, half of it from the domestic spending.
And also just cuts everybody. And what we're saying there is a better way of doing this, if we're going to go over the cliff, can we smooth it over three years, that means the Clinton tax rates coming back not all at one time.
And example would be this, if you're on the lowest end of income tax bracket, and you're paying 10 percent, right now, if we go over the cliff, you'll be paying 15 percent next year. If we're going to smooth that over three years, that means you go up 1.6 percent to 11.6 and proportionately in all other income brackets.
To me, that's a better way to smooth it. The other thing is if you take the cuts, should the cuts come all across the board, or discretionary through OMB? I think that's a better way.
JOHNS: OK, Senator, thanks so much. Good talking to you. We want to go over to the Senate floor where you work, by the way. There is the Republican Leader Mitch McConnell talking about a deal. He said they're very close.
(BEGIN LIVE FEED)
SENATOR MITCH MCCONNELL (R), MINORITY LEADER: We are very, very close. As the president just said, the most important piece, the piece that has to be done now, is preventing the tax hikes. President said, quote, "For now our most immediate priority is to stop taxes going up from middle class families starting tomorrow," end quote. I agree.
He suggested that action on "The Sequester" is something we continue to work on in the coming months. So I agree. Let's pass the tax relief portion now. Let's take what's been agreed to and get moving. Let me say this was not easy to get to.
I mean, the vice president and I last spoke about yesterday about 12:45 this morning and then again at 6:30 this morning and multiple times here in the day this morning. This has been clearly a good faith negotiation.
We all want to protect taxpayers and we can get it done now, right now. So let me be clear. We'll continue to work on finding smarter ways to cut spending, but let's not let that hold up protecting Americans from the tax hike that will take place in about ten hours.
Ten hours from now. We can do this. We must do this. I want my colleagues to know that we'll keep everybody updated as we continue to try to wrap this up. I yield the floor.
(END LIVE FEED)
FEYERICK: So very much ongoing. Well, if you have children, you need to listen up. There are four things about the fiscal cliff that you need to know about. We're talking tax credits that keep money in your wallet. Will they disappear or have they been negotiated at last?
FEYERICK: All you parents out there may be in a huge bind without the fiscal cliff deal paying for child care or saving for college. Four tax breaks would shrivel overnight and it could cost your family hundreds of thousands of dollars.
Now the president has suggested that they may have reached some agreement. Cnnmoney.com personal financial reporter, Blake Ellis is tracking the fiscal cliff's potential impact on parents and families.
Blake, what is so interesting to me is that this was really hitting families and the middle class, a married couple with two kids owing an extra thousand dollars in taxes for the child tax credit. Explain what that means.
BLAKE ELLIS, PERSONAL FINANCE REPORTER, CNNMONEY.COM: Yes, Deb. Well, everyone's talking about taxes on the rich, millions of middle class and low income families could be hit really hard if a series of tax breaks for families aren't extended.
Like the child tax credit that you just mentioned. Right now, it gives families $1,000 per child as a tax credit and that's scheduled to be cut in half to $500 next year. So that means for a family with two children, they could lose -- they could stand to lose about $1,000 next year.
FEYERICK: You know, it is so interesting because the changes are so subtle and with everybody so consumed and focused on, you know, the fiscal cliff, this is one of those things that sort of was on the back burner, discussion pre-empted on this, but paying for college also. That could get much harder as well, though the president seems to suggest that maybe there has been some development there. For low income parents, what is at stake?
ELLIS: Well, definitely that's a huge one. The American opportunity tax credit is scheduled to revert to the hope credit. And right now the American opportunity tax credit gives families a big break on college costs and helps a lot of families afford college. And that's scheduled to drop by hundreds of dollars next year. So that would hit many families trying to afford college really hard.
FEYERICK: Right. And clearly all of these different tax credits, not just the child care, but child independent care and earned income tax credit, all of that helping middle class and low income families be raised above the poverty line. Blake Ellis, thanks so much -- Joe.
JOHNS: All right then, up next, pink slips are being handed out in the NFL at a record pace. Coaches and general managers are being told to get out of town. You're going to hear some surprises.
JOHNS: Sunday marks the end of the NFL's regular season and the day after usually isn't to kind to head coaches on losing teams. But even a winning record can't guarantee job security. Yes, it has absolutely been a firing frenzy today on the NFL's so-called Black Monday.
Seven coaches got their pink slips, most before 11:00 Eastern Time. The most shocking, I think to all of us, was Chicago Bears Head Coach Lovie Smith. He's getting the boot after nine seasons, including a trip to the Super Bowl. His team finished 10-6, but missed the playoffs.
Bears quarterback Jay Cutler got the news during a live radio show.