Fiscal Cliff

Published on July 2016 | Categories: Types, School Work | Downloads: 22 | Comments: 0 | Views: 202
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Definition of the Fiscal Cliff deal.



Regine Anne M. Reyes Eco-3A


The fiscal cliff which ended at the midnight hour of the first day of the year 2013, was a deal wherein it is concerned with the simultaneous happenings at the close of 2012 and the dawning of 2013. It focuses more on how to reduce the country’s budget deficit that the result may significantly have an impact on people’s personal finances over the coming years.

The cliff would have automatically imposed a deep cut on government spending which it was a product of an eleventh-hour compromise on authorizing more government debt in 2011. As the expiration of the 2001 and 2003 President George W. Bush tax cuts, there would have punched a half-trillion-dollar hole in the economy.

Events like payroll tax cut and other important tax-relief provisions are also included in the fiscal cliff. At the same time, lawmakers must raise the debt ceiling once again that may trigger another standoff in the congress.

The American government could save as much as $600 billion starting next year if the tax increases and government spending cut takes effect but it may also result a great impact on the economy that could likely mean to a new recession according to the Congressional Budget Office.

So much fiscal tightening may result to a slow and anemic growth on the country’s economy. The Congressional Budget Office estimates that reducing the deficit so quickly will reduce growth next year from 4.4 % to just 0.5 %.

The fiscal cliff seems to be a long, substantial bill even though it does very little result to reduce the deficit or bring the people’s debt under control in a meaningful way.

The beneficiaries of the cliff are mostly families with children, students and their parents, retired philanthropists, mass affluent who makes between $200,000 and $400,000 a year, medicare recipients, unemployed, underwater homeowners, and also low-income workers.

People who earns and makes money $50,000 per year above must pay a higher amount of tax to the government. Single taxpayers earning more than $400,000 and couples earning more than $450,000 will see their rates go up from 35 % currently to 39.6 %.

High-earning investors who make money from selling stocks, real estate and other investments they've owned for more than a year will pay more than they did in 2012. Also, under the fiscal cliff fix, few people will pay federal estate taxes, since estates up to $5 million, which will be indexed annually for inflation, are exempt. But estates will now pay a 40 % tax on amounts over $5 million, up from 35 % last year.

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