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What the Fiscal Cliff Deal Means for Georgians
To avoid the tax increases and spending cuts that economists feared might send the country back into recession, Congress on Tuesday passed the American Taxpayer Relief Act of 2012. The bill ensures that the majority of Americans will pay the lower Bush-era tax rates permanently and offers federal lawmakers an additional two months to grapple with spending cuts.
To afford this tax relief, the bill stipulates that individuals who earn $400,000 a year and couples who earn $450,000 a year will pay a higher tax rate on that income. Higher income taxpayers will also note a limit on their itemized deductions and personal exemptions.
Even with this bill, though, the fiscal cliff presents several challenges, says State Fiscal Economist Kenneth Heaghney.
"What has been done has only addressed one of those pieces and only in a partial way," he says.
According to Heaghney, while lawmakers have addressed the tax increases that threatened to destabilize families' budgets, they have yet to tackle the array of spending cuts and the structural imbalance in the federal budget. In the coming months, federal lawmakers will still have to compromise on cuts to defense and social programs and come to an agreement about the debt limit.
Because the fiscal cliff legislation never aimed to prevent the payroll tax cuts from expiring, Heaghney adds, you'll soon see more money coming out of your paycheck. Offered as temporary relief to families during the worst of the recession, those tax cuts have expired. You'll now contribute 2 percent more with each paycheck to fund Social Security.
If you'd like to learn more, read the full text of the American Taxpayer Relief Act of 2012.
About the Author
Noralil Ryan Fores writes about business, taxes, elections and the environment for GeorgiaGov. She's a graduate of Florida State University's film school and Syracuse University's journalism program.