What all is in the Fiscal Cliff bill

The Fiscal Cliff bill did more than extend the Bush tax cuts for everyone except those who make $450,000.  Here is a useful summary of what’s in the new law:

— 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 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.).

— The sequester will be delayed for two months. Half of the delay will be offset by discretionary cuts, split between defense and non-defense. 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 pay freeze on members of Congress, which Obama had lifted this week, will be re-imposed.

— The 2009 expansion of tax breaks for low-income Americans: 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 will not address the debt-ceiling, and the payroll tax holiday will be allowed to expire.

— Two limits on tax exemptions and deductions for higher-income Americans will be reimposed: Personal Exemption Phaseout (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000.

—The full package of temporary business tax breaks — benefiting everything from R&D and wind energy to race-car track owners — will be extended for another year.

— Scheduled cuts to doctors under Medicare would be avoided for a year through spending cuts that haven’t been specified.

— Federal unemployment insurance will be extended for another year, benefiting those unemployed for longer than 26 weeks. This $30 billion provision won’t be offset.

— A nine-month farm bill fix will be attached to the deal, Sen. Debbie Stabenow told reporters, averting the newly dubbed milk cliff.

via Wonkbook: Everything you need to know about the fiscal cliff deal.

About Gene Veith

Professor of Literature at Patrick Henry College, the Director of the Cranach Institute at Concordia Theological Seminary, a columnist for World Magazine and TableTalk, and the author of 18 books on different facets of Christianity & Culture.

  • http://enterthevein.wordpress.com J. Dean

    I’m beginning to wonder whether or not this “cliff” was a boogeyman designed to scare people into legislation. For something that was so dire, there seemed to be a bit of a lackluster attitude toward getting it fixed in D.C.

    Never trust a politician who stands to benefit from the crisis he cries about.

  • http://enterthevein.wordpress.com J. Dean

    I’m beginning to wonder whether or not this “cliff” was a boogeyman designed to scare people into legislation. For something that was so dire, there seemed to be a bit of a lackluster attitude toward getting it fixed in D.C.

    Never trust a politician who stands to benefit from the crisis he cries about.

  • MarkB

    Another failure by our legislators. They/we have not even come close to addressing the real problem of overspending. When will that happen?

  • MarkB

    Another failure by our legislators. They/we have not even come close to addressing the real problem of overspending. When will that happen?

  • http://enterthevein.wordpress.com J. Dean

    MarkB @ 2,
    Silly lad, giving politicians credit for doing the common sensical and right thing!

  • http://enterthevein.wordpress.com J. Dean

    MarkB @ 2,
    Silly lad, giving politicians credit for doing the common sensical and right thing!

  • Steve Bauer

    I have two quesstions.

    1) What does the word “permanently” really mean? Can Congress pass a law that says future Congresses cannot ever, ever do something?

    2) Does this bill make the debt go up or down? I suspect this “patch” ends up a net minus. It seems that “Republican” leaders’ refusal to raise taxes means that they can only vote for packages that increase the debt.

  • Steve Bauer

    I have two quesstions.

    1) What does the word “permanently” really mean? Can Congress pass a law that says future Congresses cannot ever, ever do something?

    2) Does this bill make the debt go up or down? I suspect this “patch” ends up a net minus. It seems that “Republican” leaders’ refusal to raise taxes means that they can only vote for packages that increase the debt.

  • MarkB

    Steve @ 4

    I think that the proposals that were put forward by the Democrats increased taxes and increased spending so it was a net increase in spending as this particular bill is. I don’t think it is so much a Democrat or Republican problem as it is an inherent problem within our system. There is no incentive for legislators to be fiscally responsible, since they buy votes with their spending. A lot of them talk a lot about fiscal prudence, but few actually do anything meaningful to help with reducing spending.

  • MarkB

    Steve @ 4

    I think that the proposals that were put forward by the Democrats increased taxes and increased spending so it was a net increase in spending as this particular bill is. I don’t think it is so much a Democrat or Republican problem as it is an inherent problem within our system. There is no incentive for legislators to be fiscally responsible, since they buy votes with their spending. A lot of them talk a lot about fiscal prudence, but few actually do anything meaningful to help with reducing spending.

  • MarkB

    J. Dean @ 3

    There is no common sense in politics. And I was definitely not giving any of them credence for having any.

  • MarkB

    J. Dean @ 3

    There is no common sense in politics. And I was definitely not giving any of them credence for having any.

  • forty-two

    Steve @4:

    WRT the tax cuts being “permanent”, I think that just means that they don’t have a sunset provision. Sure, a future Congress could vote to reduce/eliminate them, but they’d have to take action *to* get rid of them, whereas before they were going to expire if Congress *didn’t* take action to extend them.

  • forty-two

    Steve @4:

    WRT the tax cuts being “permanent”, I think that just means that they don’t have a sunset provision. Sure, a future Congress could vote to reduce/eliminate them, but they’d have to take action *to* get rid of them, whereas before they were going to expire if Congress *didn’t* take action to extend them.

  • DonS

    Forty-two @ 7 is right with respect to the definition of “permanent”. Nothing is ever permanent in the tax code, which is one reason why productive elements of society get so frustrated. It’s very hard to plan and budget when you can’t account for your most significant expense.

    This bill was a travesty, imposed by a president who has only one goal — to soak the productive sector of our economy. He doesn’t care about the deficit. I’m sorry that the Republicans caved again on the spending side — we have now spiked our deficit into the $1 trillion range again for this fiscal year. Does anybody care about the future generations who are going to be stuck with our mess?

    We’ll go through the whole thing again in March, in connection with the debt ceiling “crisis”. Another round of demagogueing by our president and media is on tap.

  • DonS

    Forty-two @ 7 is right with respect to the definition of “permanent”. Nothing is ever permanent in the tax code, which is one reason why productive elements of society get so frustrated. It’s very hard to plan and budget when you can’t account for your most significant expense.

    This bill was a travesty, imposed by a president who has only one goal — to soak the productive sector of our economy. He doesn’t care about the deficit. I’m sorry that the Republicans caved again on the spending side — we have now spiked our deficit into the $1 trillion range again for this fiscal year. Does anybody care about the future generations who are going to be stuck with our mess?

    We’ll go through the whole thing again in March, in connection with the debt ceiling “crisis”. Another round of demagogueing by our president and media is on tap.

  • helen

    — The Alternative Minimum Tax will be permanently patched to avoid raising taxes on the middle-class.

    “What does this mean?” ;)
    I’ve been looking, but I can’t find more than this sentence.
    [Not my problem, but I want to understand the complaints of the "better off" about AMT.]

  • helen

    — The Alternative Minimum Tax will be permanently patched to avoid raising taxes on the middle-class.

    “What does this mean?” ;)
    I’ve been looking, but I can’t find more than this sentence.
    [Not my problem, but I want to understand the complaints of the "better off" about AMT.]

  • DonS

    Helen @ 9, see here: http://abcnews.go.com/blogs/politics/2013/01/ding-dong-is-the-amt-patch-finally-dead/

    The AMT has become the bane not just of the “better off”, but of the middle class. The best patch would be to eliminate it.

  • DonS

    Helen @ 9, see here: http://abcnews.go.com/blogs/politics/2013/01/ding-dong-is-the-amt-patch-finally-dead/

    The AMT has become the bane not just of the “better off”, but of the middle class. The best patch would be to eliminate it.

  • fjsteve

    “I’m beginning to wonder whether or not this “cliff” was a boogeyman designed to scare people into legislation.”

    Must have been a weapon of mass distraction.

  • fjsteve

    “I’m beginning to wonder whether or not this “cliff” was a boogeyman designed to scare people into legislation.”

    Must have been a weapon of mass distraction.

  • MarkB

    I heard on the radio today that 2/3 rds of the Republicans voted against the bill in the House. So that really makes it a Democratically passed bill with help from some of the Republicans. So much for Boehner leading the Republicans on this bill.

  • MarkB

    I heard on the radio today that 2/3 rds of the Republicans voted against the bill in the House. So that really makes it a Democratically passed bill with help from some of the Republicans. So much for Boehner leading the Republicans on this bill.

  • larry

    Ive a solution. Both party’s huff and puff against the other side. Both parties incite antagonistically the “avg. American on their side against the other “. All this basically keeps politicians in the business of being “their savior “. The manufactured “crisis of the day ” creates the need for the party god.

    Why not let Americans vote or poll in the various income groups what YOU (I /me) thinks is an appropriate tax % for my income bracket. The question cuts both ways and personally. What is too much, for me and what is me under obligating my tax requirement. Whether I make

  • larry

    Ive a solution. Both party’s huff and puff against the other side. Both parties incite antagonistically the “avg. American on their side against the other “. All this basically keeps politicians in the business of being “their savior “. The manufactured “crisis of the day ” creates the need for the party god.

    Why not let Americans vote or poll in the various income groups what YOU (I /me) thinks is an appropriate tax % for my income bracket. The question cuts both ways and personally. What is too much, for me and what is me under obligating my tax requirement. Whether I make

  • larry

    Oops …cont… whether I make$1000 a year or billions. Whether I’m left of BO or right of RR. Whether I’m 18 or 78. What’s my responsible part and what’s a complete burden. Because its easy, and in total with the sin nature for me to say Bob over their should pay, wrong question. What is my part in light of what I make regardless of my politics. Allow together different. When I consider my income, great or small. I wonder where the %s would fall when I figure my money in the Kitty? How close or far they would be from the huff and puff of the electoriol gods out their.

    Forget the other guy. What do you (I) think is my %$.

    Then we could get away from these speculative deity wannabes saying this is what everyone thinks is fair.

    Yes, REAL skin in the game left and right pro me.

  • larry

    Oops …cont… whether I make$1000 a year or billions. Whether I’m left of BO or right of RR. Whether I’m 18 or 78. What’s my responsible part and what’s a complete burden. Because its easy, and in total with the sin nature for me to say Bob over their should pay, wrong question. What is my part in light of what I make regardless of my politics. Allow together different. When I consider my income, great or small. I wonder where the %s would fall when I figure my money in the Kitty? How close or far they would be from the huff and puff of the electoriol gods out their.

    Forget the other guy. What do you (I) think is my %$.

    Then we could get away from these speculative deity wannabes saying this is what everyone thinks is fair.

    Yes, REAL skin in the game left and right pro me.


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