The WaPo's Wonkbook website has posted a fairly concise summary of the Senate's just-passed, quick fix (very short term: 60-day) Fiscal Cliff "solution." See: "Wonkbook: Everything you need to know about the fiscal cliff deal." If the House passes this deal, as is (assuming that would happen in the next few days, which is a big assumption), everyone earning less than $113,700 per year will see a immediate 2% cut in their paychecks. More from the WSJ...
How much will your taxes change? ”For millions of wage earners, the most immediate effect would be the lapse of a two-percentage-point payroll-tax cut that was part of a deal President Barack Obama struck with Republicans late in 2010. It lowered to 4.2% from 6.2% the employee portion of the Social Security tax, allowing workers to keep more take-home pay. For an individual earning the maximum 2013 cap of $113,700 or more, the increase would be nearly $200 per month. Overall, the expiration of this stimulus would cost working Americans $125 billion a year.” Laura Saunders in [http://online.wsj.com/... The Wall Street Journal.]There are some offsets (comprised primarily of extensions to existing programs) to this contained in the current iteration of the legislation, but the bottom line is folks earning less than $113,700 per year will see an immediate 2% cut in their paychecks.
Here are the bullet points, paraphrased from the WaPo's Suzy Khimm, "Your fiscal cliff deal cheat sheet"...
— Tax rates will permanently rise to Clinton-era levels for families with income above $450,000 and individuals above $400,000. All income below the threshold will permanently be taxed at Bush-era rates.— "The sequester will be delayed for two months." In the meantime, we're informed by Ms. Khimm that half of this delay will be offset by cuts split between defense and non-defense items. "The other half will be offset by revenue raised by the voluntary transfer of traditional IRAs to Roth IRAs, which would tax retirement savings when they’re moved over."
— The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It will remain at 15 percent for everyone else. (Clinton-era rates were 20 percent for capital gains and taxed dividends as ordinary income, with a top rate of 39.6 percent.)
— The estate tax will be set at 40 percent for those at the $450,000/$400,000 threshold, with a $5 million exemption. That threshold will be indexed to inflation, as a concession to Republicans and some Democrats in rural areas like Sen. Max Baucus (D-Mt.)...
— While the President had lifted the pay freeze on federal civilian employees over the past few days, it will be re-imposed under this version of the legislation.
— Low-income Americans will benefit from a continuation of the 2009 expansion of tax breaks, specifically: the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Credit will be extended for five years.
— "The Alternative Minimum Tax will be permanently patched to avoid raising taxes on the middle-class."
— The deal does not address the massive problems related to the debt ceiling. And, as noted, above, the payroll tax holiday will expire, effectively reducing paychecks by 2%, immediately.
— Two limits on tax exemptions and deductions for high-income taxpayers willl be back: the Personal Exemption Phaseout ("PEP") [will be set at $250,000]; and the itemized deduction limitation ("Pease") takes effect at the $300,000 threshold.
— Previously established "temporary business tax breaks" — covering a myriad of items, "from R&D and wind energy to race-car track owners" — would be extended for another year.
— Scheduled Medicare cuts to doctors would be deferred as a result of yet-to-be-determined spending cuts.
— Federal unemployment insurance would be extended for a year; which would benefit those that have been jobless for longer than 26 weeks. This is a proposed $30 billion provision which would not be offset, per the current iteration of the bill just passed in the Senate.
— "The milk cliff" will be temporarily averted, as Senator Debbie Stabenow referred to it, due to a "nine-month farm bill fix" which was attached to the legislation.
But, at the end of the day, from a purely political standpoint, this amounts to an immediate 2% cut in paychecks for those earning less than $113,700 per year..
And, ladies and gentlemen, while Washington will spin the crap out of this, try paying 2% less than the amounts billed by your creditors this month, and let me know how that works out for you?
Essentially, this deal sucks!