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According to the Bi-Partisan Policy Center a set of major tax and spending policy changes are scheduled to occur on January 1 and 2, 2013.
Unless Congress intervenes, these changes will have a substantial impact on the federal budget and the economy at large. The term fiscal cliff was used by Federal Reserve Chairman Ben Bernanke when he warned of the harm that the American economic recovery would face if Congress does not act.
At midnight on December 21, 2012 the United States will be faced with what is being called the “fiscal cliff.” In short this cliff is composed of several parts.
1. The payroll tax reduction passed in 2010 will end.
2. The temporary tax rates passed under President Bush will lapse.
3. Obamacare’s taxes will come due.
4. The Alternative Minimum Tax will expand to many more taxpayers.
5. Extended unemployment benefits will expire.
6. Some $78 billion in federal spending will be sequestered.
7. Medicare “doc fix” will expire.
Below timeline courtesy of the Bi-Partisan Policy Center:
Fiscal Cliff Timeline
- Debt limit reached
- FISCAL CLIFF IMPACT, CALENDAR YEAR 2013: $661 BILLION
- Expiration of 2001, 2003, and 2009 tax cuts ($281 billion)
- Expiration of payroll tax holiday ($115 billion)
- Deadline for addressing tax extenders and business depreciation ($75 billion)
- Expansion of Alternative Minimum Tax ($40 billion)
- Expiration of extended unemployment benefits ($34 billion)
- Imposition of Patient Protection and Affordable Care Act taxes ($24 billion)
- Expiration of Medicare “doc fix” ($14 billion)
- Imposition of sequester cuts ($78 billion)
- 113th Congress convenes
- Presidential Inauguration Day
- “Extraordinary measures” exhausted
- Expiration of Fiscal Year 2013 continuing resolution
- Expiration of Temporary Assistance for Needy Families (TANF)
- Political excuses for increasing pension debt
- Airport Taxing Authority chooses not to levy taxes
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