Posted on: 14th Jan, 2013 11:40 pm
A Senate-passed bill has been approved by the House of Representatives to scale down the effects of fiscal cliff. This has somewhat allayed the painful effects of some tax increases and spending cuts.
The House approved the bill in a vote of 257-167. Immediately after the result of the voting, the visibly happy President Barack Obama commented, “Thanks to the votes of Democrats and Republicans in Congress, I will sign a law that raises taxes on the wealthiest 2% of Americans while preventing a middle-class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America.â€
The economy is crippled with severe spending problem and the national debts amount to a whopping $16 trillion. Without meaningful reforms, the ordeals are likely to continue. Given the critical phase that the economy is passing through, this partial aversion of fiscal cliff is of paramount significance. This bill has deep-rooted impact on various fiscal factors such as taxes and spending.
Capital gains taxes for high earners have been increased from 15% to 20%. Minimum alternative tax has been fixed permanently. It has also allowed for the expiration of the temporary payroll tax cut. Now, all the Americans have to pay 2% extra payroll taxes.
Soon after the announcement of this bill, the markets across the globe reacted positively. Stocks in Australia and Asia were upbeat. US oil & gas and commodities scripted strong performance.
Despite its extraordinary positive implications, this bill has not been able to address the burning problem of US debt ceiling. All the experts, lawmakers, political parties were aware that fiscal cliff was coming, but a broad consensus could not have been reached to address the debt crisis that the country is facing. The nation has many bumps to cross in 2013 too.
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The House approved the bill in a vote of 257-167. Immediately after the result of the voting, the visibly happy President Barack Obama commented, “Thanks to the votes of Democrats and Republicans in Congress, I will sign a law that raises taxes on the wealthiest 2% of Americans while preventing a middle-class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America.â€
The economy is crippled with severe spending problem and the national debts amount to a whopping $16 trillion. Without meaningful reforms, the ordeals are likely to continue. Given the critical phase that the economy is passing through, this partial aversion of fiscal cliff is of paramount significance. This bill has deep-rooted impact on various fiscal factors such as taxes and spending.
Effects on taxes
The bill has advocated tax hikes for high-earner Americans. Income tax rate for the single filer earning more than $400,000 and joint filers earning more than $450,000 has been increased to 39.6%. However, tax rates for the single filer and the joint filers earning less than those threshold limits have been kept unchanged.Capital gains taxes for high earners have been increased from 15% to 20%. Minimum alternative tax has been fixed permanently. It has also allowed for the expiration of the temporary payroll tax cut. Now, all the Americans have to pay 2% extra payroll taxes.
Effects on spending
Sequestration – a run of automatic spending cuts – has been delayed by 2 months. This is likely to provide more time to the lawmakers so as to come out with long-term solutions. Unemployment insurance benefits have been extended by 1 year. The Food, Conservation and Energy Act of 2008 has also been extended by one year so as to contain the prices.Market repercussions and drawbacks
Soon after the announcement of this bill, the markets across the globe reacted positively. Stocks in Australia and Asia were upbeat. US oil & gas and commodities scripted strong performance.
Despite its extraordinary positive implications, this bill has not been able to address the burning problem of US debt ceiling. All the experts, lawmakers, political parties were aware that fiscal cliff was coming, but a broad consensus could not have been reached to address the debt crisis that the country is facing. The nation has many bumps to cross in 2013 too.
Related Forum Discussions