On New Years Day, the U.S. Senate was able to pass a bill (89:9) that could potentially prevent the U.S. from experiencing a large economic hit, or at least post-pone that threat. Not all issues of the Fiscal Cliff , and perhaps the ones most detrimental to our economy, have been addressed however, leaving Congress to extend the cuts to the Federal budget for two more months. The following is included in the bill proposed:
-An increase in taxes for married couples with an income of at least $450k, $400k for singles; a rate increase of 4.6% from
-For the same group of people, an increase in taxes on dividends & capital gains; from 15 to 20%
-Estates valued over $5 million will see a 5% increase in taxes (indexed to rate of inflation)
-A 9 month extension on the farm bill- preventing milk prices from doubling
-An extension of unemployment benefits up to a year
-A 5 year extension on the college tuition tax credit
-An inflation adjusted Alternative Minimum Tax rate, an extension to the “doctor fix” which avoids pay cuts from Medicare doctors, as well as a number of other business tax benefits such as renewable energy
-A revocation of the $900/year salary raise of Congress
The bill does not include an extension of the a payroll tax break , meaning workers will see an increase in 2% taken from their paychecks.
Keep a lookout for the Smart Money Newsletter later this week for additional updates on what is going on in the financial markets and of course the ongoing fiscal cliff negotiations.