Historical Perspective
Going
over the fiscal cliff refers to the facts that all,
the Bush tax cuts, AMT and cut payroll taxes are going to expire at the end of
2012. While the tax increases and spending cuts would reduce
the size of the national shortfall, most economists feel that the sudden
changes would throw the nation i.e. USA into an additional recession,
particularly when the country has been so reliant on the fiscal incentive over
the past number of years.
Systems Affected by the Issue
Through fiscal cliff the
American system is affected totally. As it was the bill through which the large
number of peoples were forced to give taxes and those who are already giving
The taxes should now give more taxes. It will
more affects on the middle class people. The payroll is cut down from 6.2 % to
4.2%.
Issues/Analysis
Fiscal
Cliff has many major issues. These are described as below:
Bush era
tax cuts: The president Bush has given the relief to almost every American. It
was to be expired on 31 Dec, 2012. Mostly the wealthy people were benefitted
from this bill.
Earned
income tax and child tax credit: The expansions which are
benefitting the poor and the middle class families also were to be expired on
Dec 31.
Joblessness
benefits: The long term emergency unemployment benefit also has to expire on 31
Dec.
Milk
Cliff: The failure to extend the current milk program which was 60 years old
can led to the doubling of the milk prices.
Pay
freeze in congress: A pay freeze in congress has been effect from
2011. President Obama has lifted it earlier to allow cost of living increase in
2013.
Estate
tax: In the start of 2013 the estate tax was scheduled to rise to almost
level of 55 which was equal to the Clinton era. The tax exemption of states was
going to drop from $5 million to $1million.
Payroll
tax holiday: The payroll tax was enacted on 2010. Through this
the social workers get their payroll at 4.2% instead of 6.2%. This fund goes to
the social security fund.
Substitute
minimum tax: It means that it is to assure the wealthy people
should pay taxes. ATM is going to threaten the middle class families for giving
more taxes.
Pay cut
to Medicare doctors: It was legislated in 1997 that the payment of the
Medicare doctors will be reduced so that it will be easy to keep Medicare costs
on a sustainable path.
Limits
on tax deductions and exceptions: The personal exemption phase
out (PEP) and limit on the itemized deduction commonly known as Pease were
going to take effect from 2013 after being reduced and then eliminated in
recent years.
Tax
extenders: A package of tax policies is known as Tax extenders.
This includes tax breaks for businesses and corporations for the things like
research and development. This also benefits for individuals and the policies
specific to the energy sector. (Chris, Mattea, 2013)
Important
Facts
Some of the important and major facts of the
fiscal cliff are:
Ø The
congress have not changed their style of work, if you expect a bill in which it
describes the equal parts of tax increases and spending cuts then you don’t
know the reality about the congress.
Ø We all
were against the raising of the debt ceiling but again it is being amplified by
the media.
Ø We have
not moved away the massive spending cuts. We again have to put them off after
two months.
Ø The $24 billion in cuts and tax increases in
the senate bill is a literal drop in a bucket when a country holds $16.4
trillion.
Ø Instead of this deal the congress has already
added $4 billion to the debt over the last decade.
Ø The
paychecks of millions of voters are going to be shrinking.
Ø This
deal allows them to cut social security from 4.2% up to 6.2%.
Ø The
experts are saying that almost 115 billion dollars are the expected money which
will be going to the coast of the social security. (Forbes)
Implications
Now the worker’s share is 6.2%. It
is just about 160 million people who are working on daily wages will be
affected. Those who are earning $113,700 a year will have to pay $2274. They
have to put out the added money out of their paychecks from the 15 of
February. If
implemented the Plan B was an important step in the fiscal deal as the
Republican leaders formerly had persisted that they would not raise any rates
on anyone. Obama described the tax rates for those who were earning more than
$250,000 threshold to come back to 1990’s level while lengthening the tax cuts
for everyone else. The failure of this Plan demonstrated that Boehner does not
have a sufficient amount of support by which he can pass any bill related to tax
increases. Due to this Plan B a standard family
at the apex 0.1% of cash revenues would get a tax cut of $212,506. The medium
earnings family would be granted to take to their residence a tax cut of just
$2,012 by evaluating them from the tax changes that were planned for Jan 1
2013. The average family unit in the bottom fifth of the income allocation
would be advantageous to the least extent with a tax cut of only $66. By
extending the Bush tax cuts would mean that the millionaires would still get a
tax cut on their first $1 million of income. Plan B was to be a bonus and the
most fortunate thing for the rich in terms of tax rate. A family circle earning
$500,000 to $1 million/ year would
be having the gigantic federal tax rate cut. While the families making the smallest
amount of money would be getting the smallest tax rate cut. In addition to
these entire listings, the intact income mass which is making money that is less
than $100,000 per year would be getting a smaller tax rate cut on average than the
families that are making more than $1 million/ year. (Bonnie, 2012)
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