Fiscal Cliff Definition, This refers to the simultaneous expiry of tax breaks with the introduction of tax increases and spending cuts at the end of 2012, the cumulation of which could push the US back into recession.
Among the fallout – if Congress fails to take any action before December 31 (2012) – is a significant increase in taxation on investment income, with tax rates on capital gains increasing from 15 per cent to 20 per cent, and tax rates on dividends rising to 39.6 per cent for top earners.
Adding a 3.8 per cent surtax on investment income for the wealthiest Americans – those with adjusted gross income (AGI) of more than $250,000 for joint filers and $200,000 for single filers – was part of the 2010 health reform law and takes effect in 2013. It means tax rates on capital gains would rise to 23.8 per cent, while those on dividends would increase to 43.4 per cent for the highest earners.
If Congress take no action by January 1, the US will be hit by a fiscal contraction worth $600bn in 2013, which could tip the economy into a new recession. The fiscal drag results from the expiry of a series of Bush-era tax cuts, as well as the entry into force of automatic cuts to defence and domestic spending programmes. At roughly the same time, US lawmakers will have to raise its borrowing limit, or face the risk that the country could default on its debt.
Among the fallout – if Congress fails to take any action before December 31 (2012) – is a significant increase in taxation on investment income, with tax rates on capital gains increasing from 15 per cent to 20 per cent, and tax rates on dividends rising to 39.6 per cent for top earners.
Adding a 3.8 per cent surtax on investment income for the wealthiest Americans – those with adjusted gross income (AGI) of more than $250,000 for joint filers and $200,000 for single filers – was part of the 2010 health reform law and takes effect in 2013. It means tax rates on capital gains would rise to 23.8 per cent, while those on dividends would increase to 43.4 per cent for the highest earners.
If Congress take no action by January 1, the US will be hit by a fiscal contraction worth $600bn in 2013, which could tip the economy into a new recession. The fiscal drag results from the expiry of a series of Bush-era tax cuts, as well as the entry into force of automatic cuts to defence and domestic spending programmes. At roughly the same time, US lawmakers will have to raise its borrowing limit, or face the risk that the country could default on its debt.
No comments:
Post a Comment