Thursday 14th of December 2017 8:17:22 AM

  • Facing the Fiscal Cliff

    Monday 12th of November 2012 12:29:59 PM

    Economists panic over the possibility of yet another recession as well as a drop in the jobs market if the fiscal cliff isn’t averted. After the January 1st deadline, several tax cuts will terminate and at this point severe cuts to government spending will be triggered.

    Newly re-elected President Barack Obama campaigned and won a pledge allowing tax rates for the wealthy to rise while keeping the tax rates for the middle class to remain the same. Republican officials have suggested a cut in deductions from the wealthy taxpayers rather than cutting rates. President Obama plans a more proactive approach to fixing the budget with tax increases as well as spending cuts. Rather than restricting his plan to private talks with Republican leaders, the White house plans on launching a public campaign.

    The average American family is facing a nearly $3700.00 increase in their tax bill next year. Not to mention that the stock market has had one of the worst weeks of the year due to a drop of more than 2%. These tax increases and the spending cuts that will take effect in year 2013 will be about $600 billion per year, with tax increases being the majority. What this means is that even if these tax increases are temporary it is likely that every American will be paying into it. To make matters worse there are about nine different tax increases due to take effect in 2013. Some of which include increased rates on capital earnings and other investment income, estate tax thresholds are due to lower and top earners are to face a new tax to help finance the Obama healthcare reforms.

    Over the course of the next few weeks Capitol Hill and the White House will be negotiating the issues facing the fiscal cliff. We can only hope that Capitol Hill will withdraw any or all tax increases. The problem here would be that the budget deficit that Washington currently has will carry on, resulting in the attrition of investor assurance in the solidity of the government’s finances. It is a possibility that most likely at least a few of the planned tax increases will actually happen. Those taxpayers that haven’t taken notice to the fiscal cliff will be faced with it sooner than they though.

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