Ok, so we know that the fiscal cliff was averted....well kind of. Here's the shorthand of what's actually in the fiscal cliff deal. Good news! It's not all bad.
1. Marginal Tax Rates Locked In. The much debated and demagogued "Bush Tax Cuts" hit their ten year sunset and expired on 12/31/12. In the fiscal cliff deal, Congress permanently locked in the same tax rates for everyone, unless you made make than $400k (or $450k as a family). If you make more than that, your rate goes from 35% to 39.6%. Oh, and exemptions and deductions start getting phased out for individuals at $250k and families at $300k.
This is really a mostly good thing. Basically, for 98% of the country, the "Bush Tax Cuts" are now the "2013 Obama Tax Rates". Note, these are the same tax rates that democrats have been blaming for the housing crisis, the recession, etc...and now these rates are permanent - and Obama says this is a "win". Ok, guy. Whatever you say...I just don't want to hear the word "Bush" from a democrat anymore. Ever again.
2. Obama owns all this tax policy - no one forced this upon him. He agreed, and he's going to sign it. For the rest of his term (that he hasn't even started), he can't really push to raise more taxes, so look for him to focus on non-monetary issues (guns, immigration,
global warming climate change) in order to avoid doing anything on entitlements. I have a feeling the GOP would like to have "a serious national conversation" about government spending, though.
I know that raising taxes on higher incomes won't solve the deficit or debt problem, but having permanent tax rates is a good thing. One of the best things that legislators can do is to make their laws permanent - especially taxes. Tax rates that have "sunset" provisions and expire after a certain amount of time are lunacy. Have a tax rate. If you don't like the rate, change it. But give folks some kind of permanency so they can plan their lives and businesses.
3. Capital Gains Taxes Go Up for High Earners. Again, I don't like this one on principle, because the higher income earners are the folks who have spare money to invest in equities. There aren't a lot of folks making $65k buying lots of stocks. If you're in the top income bracket, your capital gains taxes are going up to 20% from 15%. Meh.
4. Unemployment Benefits Continue. This was a big priority for the Democrats, and they got it. I can understand why. With all the unemployed people out there, ending their benefits would create a lot of pain. Folks would have to go get jobs. I think some people have been on unemployment for more than 100 weeks now, so I'm not sure where the end of this is. Will unemployment benefits be lifelong now? I guess we'll find out at some point.
5. One Year "Doc Fix". This is a classic example of Congress temporarily fixing a problem. Under current Medicare law, doctors would be paid 27% less than they are now. Each year, Congress passes a law that basically says "Don't worry about that part of Medicare." Why not fix this permanently?
6. Milk Cliff Averted. Again, this is classic. Congress temporarily fixes a stupid-ass problem they created. The farm bill was extended for 9 months. So there you go. See you in September, milk cliff.
7. AMT Permanently Fixed. For years now, Congress has passed one year "patches" to index the AMT to inflation. Apparently, they got into a frenzy of productivity and decided to go ahead and just permanently fix this. Attaboy Congress! Permanent solutions.
8. Estate Tax. It starts at $5Million now, and it takes 40%. Oh well. At least it's not temporary. If you have that much money, you've probably already started planning for the estate tax.
9. Payroll Taxes Going Back Up. The temporary payroll tax holiday is over. It hits every single person who makes any money at all. Did you enjoy your payroll tax "holiday"? Good, back to work.
10. The Sequester Is Finally Averted. Just kidding. It's only been delayed for two months. Guess what? We get to do this all over again in March!
Notably absent was anything remotely resembling restraint on government spending. Oh well, one problem at a time, right? There's probably lots of other smallish stuff in the fiscal cliff deal, but if Congress doesn't have to read the bill, I sure don't have to.