By Matthew Beil, Staff Writer
It’s January first of 2013. With each tick of the clock, the American people lean forward, closer and closer to the edge of their seats as the “Fiscal Cliff” deal is finalized and struck between congressional leaders. The bill was promptly signed into law by President Barrack Obama the next day January second. But what was this “Fiscal Cliff”?
The term “Fiscal Cliff” referred to the drastic reduction in the United States budget deficit by reduced spending and an increase in tax rates. This however, is not the first time the term “Fiscal Cliff” has been used. The most recent time before 2012 was back in 2010 when the Bush tax cuts were set to expire. Not only would those tax cuts expire, but under the Budget Control Act of 2011, cuts to many government programs would be enacted. The Budget Control Act was enacted to raise the debt ceiling so that the United States did not go bankrupt. Throughout the campaign season, we heard what each candidate and party would do to reduce the deficit. So what, if anything, does the new law do? It enables a tax raise on those families making more than 450,000 (400,000 for individuals) a year. This was a compromise, as the Republicans wanted to raise taxes on those who made a million dollars or more, with the Democrats wanting to raise taxes on those who made 250,000 or more. The bill also brought into account higher rates on capital gains and dividends for the wealthiest Americans, who will now pay twenty percent. People will be paying more into Social Security. The drastic spending cuts have been delayed for two months. As well as a delay in cuts to the amount that Medicare would pay, the Medicare salary for doctors has been postponed for a year as no agreement was reached. Parts of the farm bill were extended to keep the price of milk from going up. Personal exemptions for individuals making 250,000 and families who have an income of 300,000 will be removed and limited. There will now be an estate tax of forty percent, however the first five million in assets are exempt. The Alternative Minimum Tax will now be linked to inflation. The bill also adds five years on to the American Opportunity Tax Credit, which is gives aid to working class families for college expenses. Along with adding five more years on to the Child tax credit and the Earned income tax credit which refunds low to moderate wage earners income tax. Also that tax credit will now give businesses that provide employees transportation tax credit. There are also tax breaks for businesses, pertaining to their research and development. Finally, there will be no increase in the amount congressional leaders are paid.
While we do see some fixes and progress, there are still many issues that were just moved to another day. Is this the best that our leaders in Washington can do? They face a daunting problem, but will this “Fiscal Cliff” scenario be a constant occurrence in the future, where it comes down to the wire and we teeter on the edge of the unknown? How long can they play with fire and not get us burned?
