Voting to extend the Bush-era tax cuts, the U.S. House of Representatives took a step back from the so-called fiscal cliff late Wednesday evening.

The fate of the provisions, which are set to expire in 2012, has been a source of uncertainty for advisors and wealthy investors who would bear much of the tax increases on capital gains and dividend earnings.

But despite a 256-171 majority in the House's vote, advisors are still not likely to have a solid idea of what the fiscal cliff will look like for much of the year.

"If the House or Senate passes something unilaterally, there is still so much lack of consensus right now until the President signs it. That's when we can rely on change effectively taking place. Up to now, it's more like posturing to the audience ahead of elections," said Javier Paz, a senior analyst with Aite Group.

The tax cuts passed with a strong majority in large part because of its broad Republican support. Of the ayes, 237 came from Republicans while 19 Democrats backed the bill. Only one Republican congressman, Timothy Johnson of Illinois, voted against the measure.

Rep. Sandy Levin (D-Mich.) countered with an amendment similar to what Obama has supported that would extend the tax cuts for those couples making under $250,000, $200,000 for singles. The plan was to put the money raised from the tax increases toward small business expenses and paying off debt. Levin's bill, however, failed 170-257 as Democrats failed to gain the majority.

A similar bill to extend income tax breaks for families making less than $250,000 ($200,000 for singles) already passed the Senate earlier this year.

"The Senate has been very vocal about wanting the Bush tax cuts to impact equally the 98% and not just the wealthy," Paz noted.

Paz anticipates that in a Democrat-controlled Senate, the tax cuts will likely not make it through intact.

"That's where the democrats still control the debate, and there is a lot more posturing that will likely take place. So, we'll see," Paz said. "I don't anticipate that it's going to be as clean-cut as what happened in the House."

According to research by the Spectrem Group, many millionaire investors expect Congress to eventually come to an agreement to help soften the blow even if some of the tax cuts expire. Forty-four percent reported being only "mildly concerned," because they thought a congressional consensus would eventually mitigate the effects.

Paz believes that give the November elections, this sort of consensus is not likely at least for some time.

"I think at the latest we'll see a resolution in 2013, but I would be shocked if we go into this election and the parties don't make this an election year debate. So to see consensus is going to be surprising. It would be welcome, but surprising," Paz explained.

If the tax cuts were to expire or be significantly reduced, Paz expects that advisors will move to reallocate some of their portfolio to avoid hikes.

"Once the tax cuts end for the 1% or 2%, you can definitely expect more activity in terms of reallocation of assets to more tax advantageous vehicles," Paz noted.

Mason Braswell writes for On Wall Street. 






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