Big changes are scheduled to take effect if no new tax legislation is passed in the upcoming lame duck session.  Tax rates are scheduled to rise for all taxpayers and certain deductions will be curtailed for some taxpayers. While it's entirely possible that the "Bush tax cuts" will be extended again for all taxpayers (after all, the first extension was passed in the December 2010 lame duck session), here's why we think it's unlikely:

Much has been written about the so-called fiscal cliff.  Several prominent economists have warned that it's wrong to raise taxes and/or cut spending when the current economic recovery is fragile.  The problem is that the United States continues to run large budget deficits which are causing the national debt to grow too quickly.

At this point, the need for fiscal discipline appears to be largely self-imposed.  Even with U.S. government debt yielding close to record-low interest rates, there's still no shortage of willing lenders.  The catalyst for the recent sense of urgency was the imminent default of several European debtor nations, most notably Greece.  Fuel was added to the fire when the rating agency Standard and Poor's lowered the U.S. credit rating from AAA to AA+ in April 2011 and warned of further downgrades if spending wasn't reduced.  (It's interesting to note that investors responded to the news by buying more U.S. government debt.)  Congress took action by passing the Budget Control Act of 2011 which cut the budget deficit by $917 billion and raised the debt ceiling by $900 billion.  (Expect another heated debate on the need to raise the debt ceiling again shortly after the next election.)  The legislation also authorized the creation of the so-called Supercommittee - a team of 6 Democrats and 6 Republicans charged with the goal of finding another $1.5 trillion of deficit cuts over the next ten years.  The bill provided for $1.2 trillion of automatic deficit cuts (sequestration in Washington D.C. parlance) beginning January 1, 2013, if the Supercommittee failed to form a consensus.

Most Democrats and Republicans agree that a combination of spending cuts and tax increases is inevitable, but they differ as to the best way to implement fiscal reform. President Obama has proposed increasing tax rates for families with income in excess of $250,000 including a new minimum tax on income in excess of one million dollars.  Republican presidential nominee Mitt Romney favors reducing tax rates but eliminating most deductions.  Both candidates are being somewhat disingenuous:  Even under the most optimistic forecasts, the Obama plan does little to close the budget gap; the Romney plan is frustratingly cryptic, offering no specifics as to which deductions would be curtailed.