Global InformationUnited States fiscal cliff information
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The United States fiscal cliff refers to the combined effect of several previously-enacted laws that came into effect simultaneously in January 2013, increasing taxes and decreasing spending.
The Bush tax cuts of 2001 and 2003, which had been extended for two years by the 2010 Tax Relief Act, were scheduled to expire on December 31, 2012. Planned spending cuts under the Budget Control Act of 2011 also came into play. That Act was passed as a compromise to resolve a dispute concerning the US debt ceiling and address the failure of the 111th Congress to pass a federal budget. Discretionary spending for federal agencies and cabinet departments would have been reduced through broad cuts referred to as budget sequestration. Mandatory programs, such as Social Security, Medicaid, federal pay (including military pay and pensions) and veterans' benefits would have been exempted from the spending cuts.
The fiscal cliff would have increased tax rates and decreased government spending through sequestration. This would lead to an operating deficit (the amount by which government spending exceeds its revenue) that was projected to be reduced by roughly half in 2013. The previously-enacted laws causing the fiscal cliff were projected to produce a 19.63% increase in revenue and a 0.25% reduction in spending between fiscal years 2012 to 2013. The Congressional Budget Office (CBO) had estimated that the fiscal cliff would have likely caused a mild recession with higher unemployment in 2013, followed by strengthening in the labor market with increased economic growth.[1]
The American Taxpayer Relief Act of 2012 (ATRA) addressed the fiscal cliff's revenue side by implementing smaller tax increases compared to the expiration of the Bush tax cuts. Adjustments to spending were expected to be resolved in early 2013. Intense debate and media coverage regarding the fiscal cliff triggered widespread public attention in late 2012 due to its projected short-term fiscal and economic impact.
ATRA eliminated much of the fiscal cliff's tax side while the reduction in spending caused by budget sequestration was delayed for two months. With ATRA's passage, the CBO projected an 8.13% increase in revenue and a 1.15% increase in spending for fiscal year 2013. The act caused a projected $157 billion decline in the 2013 deficit over 2012, rather than the sharp $487 billion decrease projected under the fiscal cliff.
The raise in revenue contained in the ATRA came from increased marginal income and capital gains tax rates relative to their 2012 levels for annual income over $400,000 ($450,000 for couples); a phase-out of certain tax deductions and credits for those with incomes over $250,000 ($300,000 for couples); an increase in estate taxes relative to 2012 levels on estates over $5 million; and expiration of payroll tax cuts (a 2% increase for most taxpayers earning under approximately $110,000). None of these changes would expire.[2][3]
At 12:01 am EST on January 1, 2013, the US "technically" went over the fiscal cliff.[4][5][6][7]
Around 2 am EST on January 1, 2013, the U.S. Senate passed this compromise bill by an 89–8 margin. At about 11 pm that evening, the U.S. House of Representatives passed the same legislation without amendments by a 257–167 vote.[8] U.S. President Barack Obama signed it into law the next day.[9] However, the budget sequestration was only delayed and the debt ceiling was not changed, thus triggering the United States debt-ceiling crisis of 2013.
- ^ Staff (November 8, 2012). "Economic Effects of Policies Contributing to Fiscal Tightening in 2013". Congressional Budget Office. Retrieved February 25, 2013.
- ^ (registration required) Weisman, Jonathan (January 1, 2013). "Senate Passes Legislation to Allow Taxes on Affluent to Rise". The New York Times. Retrieved January 1, 2013.
- ^ Cite error: The named reference
hook1was invoked but never defined (see the help page). - ^ Hicks, Josh (January 1, 2013). "Over the fiscal cliff: Day One". Washington Post. Retrieved November 6, 2014.
- ^ Rachelle Younglai & Thomas Ferraro (January 1, 2013). "House Republicans balk at "fiscal cliff" deal". Reuters. Retrieved November 6, 2014.
Strictly speaking, the United States went over the cliff in the first minutes of the New Year because Congress failed to produce legislation to halt $600 billion of tax hikes and spending cuts that start kicking in on January 1.
- ^ "Live Updates: House Will Vote on 'Fiscal Cliff' Deal". ABC News. January 1, 2013. Retrieved November 6, 2014.
The bill was not posted online 24 hours ago. But perhaps he can be forgiven since the U.S. technically went over the "Fiscal Cliff" in those 24 hours.
- ^ "The Fiscal Cliff" (PDF). Great West Financial Retirement Services. January 4, 2013. Retrieved November 6, 2014.
Although the U.S. technically went over the fiscal cliff at midnight on New Year's Eve, the Senate and the House of Representatives passed a bipartisan bill (called the American Taxpayer Relief Act or ATRA) on New Year's Day, which President Obama signed into law Thursday, January 3, 2013.
- ^ Cite error: The named reference
houserxn1was invoked but never defined (see the help page). - ^ Staff (January 3, 2013). "Obama Signs Fiscal Crisis Deal from Hawaii with Autopen". Fox News. Retrieved February 25, 2013.