Here is what the bill does:
- Tax rates increase for families with income > $450,000 and individuals > $400,000. Unchanged below those levels.
- The wealthiest to pay 20% on capital gains and dividends. 15% for everyone else.
- 40% Estate tax for the wealthy.
- Earned Income Tax Credit, the Child Tax Credit and the American Opportunity Tax Credit extended for 5 years.
- For wealthier Americans the Personal Exemption Phaseout will be at $250,000 and the itemized deduction limitation at $300,000.
- The Alternative Minimum Tax adjusted for inflation.
- No Medicare cuts. Temporary business tax breaks and unemployment benefits extended for 1 year. A nine-month farm bill will avoid milk price doubling.
- Adds $4 trillion to the U.S. deficit over the next decade (source: CBO).
- Tax revenue increases will raise around $600 billion over the next decade.
- Average Americans will pay ~ $700 more in taxes (expiring payroll tax cut).
And this is what it does NOT do:
- Extend the $16.4 trillion debt ceiling.
- Massive budget cuts to defense and other government programs – delayed for two months.
The U.S. hit its debt limit on 12/31/12. The Treasury Department will have to use creative accounting measures to keep the nation operating. It will buy us around two months. After that …we face another government shutdown.
- The fiscal cliff deal’s price tag: -$3.9 trillion or +$600 billion (washingtonpost.com)
- What The Fiscal Cliff Will Do To Your Check (soletschat.net)
- Fiscal Cliff: House OKs Compromise Deal. Investors Can Briefly Rejoice (forbes.com)
- Make between $200,000 and $500,000? Congrats, you got the best ‘fiscal cliff’ deal! (washingtonpost.com)
- Fiscal cliff deal will add $4 trillion to US deficit, says CBO (forexlive.com)
- Fiscal cliff cheat sheet: Everything you need to know about the deal (tv.msnbc.com)