What is the Fiscal Cliff, Anyway?
Posted at 9:45 a.m. on Nov. 12, 2012
Vermont Public Radio has a useful guide to understanding what makes up the across-the-board spending cuts and tax increases, known collectively as the “fiscal cliff,” that lawmakers will frantically attempt to address over the next few weeks.
“Payroll tax cut. To give consumers more cash to spend, Congress lowered payroll taxes by 2 percentage points during 2011 and 2012. For someone making $50,000 a year, that worked out to about $20 a week. If the tax holiday ends abruptly, take-home pay will immediately shrink. Bush tax cuts. On Jan. 1, all of the tax cuts that were phased in, starting in 2001, will expire. That will mean higher taxes on both income and investments.”
“Unemployment benefits. Ever since the economy tanked in 2008, Congress has been extending benefits beyond the standard 26 weeks. Those extensions will end in the new year, so lots of job seekers will be on their own in January. Depreciation incentives. Businesses will lose special depreciation allowances that encouraged capital equipment purchases. Spending cuts. Unless Congress changes the law, automatic spending cuts worth $1.2 trillion over a decade will kick in. They hit particularly hard at military spending, so many people who work for contractors will lose jobs.”