What is the Fiscal Cliff?

Posted on February 8, 2013 by

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You have probably heard about it on TV, or read about it in the newspaper, or maybe someone brought it up in casual conversation. The fiscal cliff has been a big deal in America, but what was it exactly?

First off, the term “fiscal cliff” is a nickname given to the issues that the United States government faced at the end of 2012.

The fiscal cliff would be when the terms of the 2011 Budget Control Act would go into effect, which would be at midnight on December 31, 2012.

The agreement for a deal to avoid the fiscal cliff came three hours before midnight on January 1, 2013. The Senate version of the deal was passed first, and the House of Representatives’ deal passed 21 hours later.

It is easier to view the fiscal cliff in two parts, the first part being the expiration of the Bush-era tax cuts. The second part of the fiscal cliff was called the sequester, which was the beginning of cuts in spending.

The new deal that was struck during the fiscal cliff did several things. First, the new deal included a few new changes to the tax code. One of these changes was a permanent extension of Bush-era tax cuts for families whose income is lower than $450,000 a year.

A few minor changes were implemented in the new deal as well. Congress decided to extend unemployment benefits for another year, and extended tax extenders for businesses and individuals as well.

The fiscal cliff came and went, and a new tax deal was created. The final results are simply new tax regulations created to replace the old ones.

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