Fiscal cliff is a bunch of significant tax increases in the US federal tax systems as well as cuts in spending. These changes in taxation are set to slash the federal budget deficit to a whooping $503 billion. This reduction is set to be achieved between the fiscal year 2012 and 2013. There is the good and bad side of these federal tax system changes and economic analysts have aired different views.
The contraction of the federal budget by $503 in year fiscal year 2013 has been cited to bring some controversies. The budget contraction could result to another recession in the first half of 2013. There is a projection of decline in economic output by 0.5 percent in the period between the fourth quarter of 2012 and 2013. In addition, it is also projected that there will be unemployment in the country that could stretch to figures over 9 percent.
With these kinds of anticipations, it is certain that great considerations need to be done on how the budget contractions could influence the economy. The fiscal cliff law has both good and bad news. It is expected that with this change in taxation, every American is going to pay more in taxes. It is argued that the fiscal cliff deal represents the largest figure of tax increase ever witnessed in the last 20 years.
Worse still, the deal is thought to stretch the national debt amount by 4 trillion dollars in the next 10 years. Perhaps those who passed the fiscal cliff bill may not have really meant the considerations on how it would affect the economy and people. Perhaps congress members could have gone through the 150-page document in depth and clearly articulate aspects of debate that could bring in some changes on the bills.
With all the bad side of the bill, there is still some goodness. One positive aspect about fiscal cliff bills is that the income tax rates did not hike for the poor and middle class people. This certainly shows that the bill sought to spare the population, which is already struggling with effects of the economic recession of 2007.
For the past half decade, things have been tough for many Americans especially the middle and low class earners as jobs market shrunk, bad FICO score engulfed most of the borrowers, and businesses carried out redundancies. As the economic recovery progresses, the fiscal cliff deal seems to have past the worst for the low-income earners.
This is great news for millions of families, which are struggling with aspects like mortgage loan problems, foreclosures, bankruptcy and other monetary challenges. Any significant rise in tax could surely have crippled the already financially weak citizens. In addition, in this bill, the Alternative Minimum Tax- AMT will henceforth be adjusted for inflation.
The AMT fix may have saved about 20 million households who could have suffered because of the Alternative Minimum Tax in earnings they made in 2012. Moreover, the bills also hold that millions of American citizen who are unemployed with still continue to receive unemployment benefits.