Brace yourself for the "fiscal cliff"

By Stan Harris, President/CEO, Louisiana Restaurant Association

Stan Harris is a former restauratuer
and has more than 25 years of
experience as an owner of
multi-unit operations in a
number of U.S. States.

It seems hard to believe that another year is almost over. The year began with the election of over 40 new legislators (out of 144) and ended with a national election.

This week, I had the opportunity to visit with several members of the New Orleans area Legislative Delegation. Of note, the discussions entailed the re-districting borders for many of their districts and others statewide. The rationale for the re-districting was sugarcoated in many respects, when in essence much of it was done to skew the boundaries to the benefit or detriment of a particular incumbent.

When you turn on the news right now, on the federal level it’s all coverage of the impending “fiscal cliff,” or the mandated sequestration that implements across the board cuts to federal departments and programs.

More concerning to the business and restaurant sectors is the approaching expiration of the “Bush,” and now with the extension in 2011 renamed the “Obama,” tax cuts. Payroll tax rates will return to prior levels and marginal tax rates resulting in an immediate tax increase. The President and the Democrats on the Hill want to keep the rates the same for all but the highest earners and this is proving to be problematic without agreed upon reductions in entitlement programs which are unsustainable at current revenue levels.

The interesting part of this debate is that instead of being at home, Congress will remain in Washington looking busy but until a real compromise can be debated, I don’t see the “cliff” being avoided. There may be a quick extension for 60-90 days, but the spending reduction and tax rate discussion will take more effort.

With the continued rise in food costs, the implementation of the Affordable Care Act and the above mentioned, the restaurant industry’s future is one with an even tighter profit margin.