The Fiscal Cliff Deal – What Does It Do and What Does It Not Do?

fiscal cliff 13

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.

The impact?

  1. Adds $4 trillion to the U.S. deficit over the next decade (source: CBO).
  2. Tax revenue increases will raise around $600 billion over the next decade.
  3. 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.

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About smudan

Coach to CEO's and Business Owners with an end game or transition in mind while simultaneously building the equity value of their enterprise and creating a better life/work balance.

4 comments

  1. Pingback: A WTF from the fiscal cliff deal… | Outspoken

  2. Pingback: Logarchism » The Deal with the Deal

  3. So helpful to have it itemized neatly. Thanks!

  4. Pingback: Fiscal Cliff Deal’s $4 Trillion Price Tag Ignored by 5 out of 6 Shows | Media Research Center | C h a r l e s O l i v e r

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