We hope that you had a safe and wonderful holiday season and wish you and your family a HAPPY NEW YEAR in 2013!!!
We have been closely following the changes our government is advocating to avert the so called "fiscal cliff" and how it will affect our client's financial plans in the future. While there are many details still to be hammered out and communicated, here is a summary of what we know now, based on the agreement currently on the table:
Congress skidded to a halt with the front tires hanging over the fiscal cliff, with the House last night joining the Senate in passing Taxpayer Relief Act. Initially, the stock markets have shown gains, however, we believe that this excitement will evaporate, because the buildup does not include raising the debt ceiling or longer-term budget cuts.
Republicans and Democrats are hardening their positions ahead of the upcoming battle over the debt ceiling, which the government hit on Monday but which the Taxpayer Relief Act didn't address. The sides also face a fight over $110B of automatic spending cuts that were delayed for two months. To buy it a couple of months regarding the ceiling, the Treasury is taking special measures.
The fiscal-cliff deal increases taxes on household incomes of over $450K to 39.6%, as well as taxes on capital gains, dividends and inheritances. The hope is to raise $600 billion in new revenue over 10 years. The payroll tax cut is allowed to lapse, so the employee portion of the Social Security tax will return to 6.2% from 4.2%. All in all, overall taxes will increase for over 75% of households in 2013, says the Tax Policy Center.
The Taxpayer Relief Act will add almost $4 trillion to the deficit over the next ten years, the Congressional Budget Office has calculated, citing the codification of the Bush-era tax cuts for most Americans. Meanwhile, the deal will probably ensure that the U.S. avoids recession but it will also help cut economic growth, economists have forecast.
As expected, the Act extends some farm support schemes for a year and averts the "dairy cliff" by ending fears that the price of milk could double - the measures prevent the revival until September of a decades' old subsidy that would have forced the USDA to buy up milk at prices way above what farmers are receiving now.
There will no doubt be much discussion and dissection of the Fiscal Cliff resolution in the media in the coming weeks. We hope you’ll feel free to call us with any questions you may have about how the plan affects you.
White House Financial & Settlement Consulting helps families live easier and less stressful lives through the proper management of their financial resources. We do this by acting as our clients’ trusted advisor providing a personal touch customized to the client’s needs! Please visit our web site at www.whitehousellc.com or contact us directly for more information!
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