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.


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.


  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

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: