AVOIDING THE FISCAL CLIFF,ONE STEP at a TIME

Marion Pellicano Ambrose

 

The US House has voted on a bill to avoid the “fiscal cliff” that we’ve all been dreading. In a late night vote on Tuesday, the bill was approved with a  257-167 vote. Most Democrats approved while many Republicans did not, stating that there weren’t enough tax cuts in the bill. The bill will now go to President Obama’s desk for approval.

I’m no political analyst, but I do know that this would prevent middle-class taxes from going up but would raise rates on higher incomes. It would also block spending cuts for two months, extend unemployment benefits for the long-term jobless, prevent a 27 percent cut in fees for doctors who treat Medicare patients and prevent a spike in milk prices. I think all this is good for A START, but there is much more work to do.

 I think our lawmakers need to get themselves busy finding ways to cut spending starting with their own salaries, bonuses, insurance plans, “expense accounts” and other ways. I believe the salary of a president or any politician should not be for life, nor should we pay for traveling expenses unless they are directly related to the business of running this country. Vacations, campaigning, and personal events should have to be paid for out of pocket just like the rest of us. If we have to pay for our medical, dental and life insurance, so should all politicians. I would also like to see a nice, reasonable “cap” put on presidential libraries. In my opinion, there are SO many ways to make cuts that won’t hurt the American people and really isn’t unreasonable to ask of our politicians.

 As I said, I’m no expert, so here is some data from the Associated Press and Channel 13 News  explaining some of the details of the bill. (picture is from CSPAN)

 

- Income tax rates: Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6 percent, up from the current 35 percent. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.

- Estate tax: Estates would be taxed at a top rate of 40 percent, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35 percent.

- Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15 percent to 20 percent.

- Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.

- Other tax changes: Extends for five years Obama-sought expansions of the child tax credit, the earned income tax credit, and an up-to-$2,500 tax credit for college tuition. Also extends for one year accelerated "bonus" depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.

- Unemployment benefits: Extends jobless benefits for the long-term unemployed for one year.

- Cuts in Medicare reimbursements to doctors: Blocks a 27 percent cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula.

- Social Security payroll tax cut: Allows a 2-percentage-point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2 percent.

- Across-the-board cuts: Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. Cost of $24 billion is divided between spending cuts and new revenues from rule changes on converting traditional individual retirement accounts into Roth IRAs.