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The ”Fiscal Cliff” and What It Means To Your Family

If immediate actions are not taken by our lawmakers it will not be a happy New Year.

This term "Fiscal Cliff" efers to the expiration of tax breaks and the introduction of tax increases and spending cuts that will take place if Congress fails to take action to prevent it by the end of this year.  If this happens it could push the U.S. economy back into recession.

If Congress take no action by Jan. 1, 2013 the U.S. will be hit by a fiscal contraction worth $600 billion, which could force an economic decline as both individuals and businesses are forced to pay higher taxes. The FISCAL CLIFF is the result of the expiration of a series of Bush-era tax cuts, as well as the entry into force of automatic cuts to defense and domestic spending programs. In addition, at roughly the same time, U.S. lawmakers will have to raise the borrowing limit, or risk default on the national debt. These cuts and tax increases were meant to be a pill too bitter to swallow and, therefore Congress would be forced to act promptly to make the fiscal changes needed well before their expiration. This situation, if it goes unchanged, would be quite a New Years Day hang-over for the entire country.

As always, it is business as usual back at the White House and House of Representatives. All efforts to avoid this catastrophic event are inching forward at a snail’s pace. Leaders of both teams are careful not to make decisions that would help avoid the crisis but, instead, are sifting through options to make each other look bad; talk about Nero fiddling while Rome burned…

Nearly all American households will be affected by the FISCAL CLIFF but low-income families would be hit the hardest. Many of these new low-income
households are our neighbors who are still reeling from the loss of income and
home value from the last recession. 

These tax increases and spending cuts are scheduled to take effect starting Jan. 2, 2013.  If our representatives in Washington cannot craft an immediate solution 121 million American households will be hit by payroll tax increases of 5 percent or more in the New Year. So aside from raises being very sparse in the work place you will be able to count on a five percent decrease in your take home
pay as you start 2013…I bet you can’t wait for the New Year!

Further, businesses would be faced with tax increases that would certainly limit their growth options as well as decrease profits unless, of course, they raise the price that you pay for their goods and services. 

So, let’s review, unless our friends in the White House and House of
Representatives act immediately to avert the FISCAL CLIFF, we are headed for
tax increases, price increases and spending cuts that will almost certainly
push the economy back into a full scale recession in early 2013. Hopefully, our government will act in a responsible manner to avert the FISCAL CLIFF immediately.

- Patrick Ingegno can be reached at inner-circle@optimum.net or
www.innercircledebtsolutions.com

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Wayne Smith November 29, 2012 at 02:17 PM
Unfortunately, too much of the focus to date has been on the issue of raising taxes on the "rich", defined as an individual who makes $200K a year or a family making $250K. Personally, I don't happen to think that anyone or any family making that income on Long Island qualifies as "rich" but the fact is, even if those tax increases are implemented, as the President wants, the amount of revenue being raised will constitute only about 7% of the current $1.1 trillion deficit. Hopefully, they'll be more than just tax increases on the "rich" that will be put on the table in the course of whatever discussions are being held.. In other words, when it comes to doing something meaningful about this country's fiscal problems, the guys in Washington need to get serious.
Chris Wendt November 29, 2012 at 04:50 PM
My problem with "taxing the rich" differently from the existing progressive tax rate system is that doing so will establish a dangerous precedent: this year, "rich" is defined as $250K. Next year "rich" could be $200K, or next election cycle, "rich" may be defined as $100K. By the next election cycle, presumably the "Bush era tax cuts" will have become permanent, and this pretext of a 'fiscal cliff' will not involve partisan Congressional negotiating about expiring tax cuts. But then, with the precedent already in hand to "tax the rich", Congress could impose a wealth ("richness") surcharge, or, use wealth ("richness") to reduce various Schedule A Itemized Deductions, like state & local income taxes, property taxes, or mortgage interest expense. I see this current "tax the rich" mentality as lying somewhere between the Russian Proletarian Revolution on the left, and the French Revolution to the right, on the idealogical continuum of human history.
EJ48 December 03, 2012 at 10:22 PM
Who’s afraid of the big bad Cliff? Does anybody remember Gramm-Rudman? The only “painless” way out of our problems is to run the printing press until it overheats and pray that the currency doesn’t collapse. Any more responsible solution will require pain, and lots of it. It will require taxes on not only the rich but the middle class, rationing Medicare dollars, changes to Social Security, starving the Pentagon and ruthlessly lopping off government programs which benefit narrow special interests. Sorry folks, it’s just not your father’s world any longer.
Matthew Provenzano December 13, 2012 at 04:26 AM
I absolutely agree. The US needs to make a choice, and The Economist put it best that the US needs to "stop spending like a big country and taxing like a small one"

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