Local expert explains impact of ‘fiscal cliff’ decisionPublished 11:38pm Friday, January 4, 2013
A Tuesday move to prevent the country’s descent off the “fiscal cliff” by the Senate still offers conflict among many politicians — on both sides of the aisle — on how solid the decision is in regards to the future of America. So what does all of this mean for local residents?
Atmore Certified Public Accountant Alan Bell gave The Advance a breakdown of exactly what people can expect from Tuesday’s “deal.”
“The first thing that should be noted is that while the bill does provide tax relief for most taxpayers, there is one item of the bill that will cause everyone’s paycheck to decrease by two percent,” Bell said. “For the past two years, employees’ social security contributions were lowered from 6.2 percent to 4.2 percent. However, this current bill will revert the rate back to 6.2 percent of earnings up to $113,700 in 2013. This means that households with earnings of $50,000 will pay an extra $1,000 in taxes in 2013 over 2012.”
Bell also said the bill will extend the decades-old tax cut on all incomes, except for individuals who earn more than $400,000 and couples that earn more than $450,000.
“For these taxpayers, the top tax rate increased from 35 to 39.6 percent in 2013,” Bell said. “Also, capital gains and dividends will continue to be taxed at the same rates except for the same income thresholds. Capital gains rates for individuals earning more than $400,000 and couples earning more than $450,000 will increase from 15 to 20 percent.”
As for unemployment benefits, Bell said long-term benefits (for individuals that have exhausted their state unemployment benefits) will continue payments through the end of 2013.
Bell said Tuesday’s decision will also extend tax credits set to expire at the end of 2012 for five years for low to middle wage earners.
Small businesses will also be impacted, according to Bell.
“The bill also extends accelerated ‘bonus’ depreciation of business investments in new property and equipment, extends credit for research and development costs and credit for renewable energy credit (such as wind-generated electricity) for one year,” he said.
A final effect of the Tuesday’s deal, Bell said, will increase taxes on large estates, but will not impact smaller ones.
“Individual estates with less than $5 million in value and family estates with less than $10 million in value will be exempt from estate taxes; however, the top estate tax rate for larger estates will increase from 35 to 40 percent in 2013.”
While many view Tuesday’s decision as a move to avoid the “fiscal cliff,” neither side of the aisle is without complaints in D.C.
U.S. Rep. Jo Bonner, R-Mobile, cast a vote against the agreement, saying his support of the process was impossible.
“At the end of the day I just couldn’t support – with my one vote – such a flawed process,” Bonner said. “There is simply no way Mr. Jefferson, Mr. Madison or our other founding fathers could have ever envisioned having the Senate pass a $4 trillion addition to the debt of our nation at 2 a.m., only to have the House take it up less than 20 hours later and there be no regard for the long-term damage we are doing to America’s future.
Over the past several months, President Obama didn’t hide the fact that he loathes the success some Americans have worked so hard to enjoy and he will get the tax increases he has so openly sought. But to think he and the Democrats in Congress couldn’t have come up with a penny — not a single penny — of cuts to offset the $4 trillion in new spending is beyond the pale. This is a sad day for our country but the saddest, at least to me, was when the American people, on Nov. 6, expressed with their vote that they believed we could continue down the path of more spending and borrowing with no consequences.”
In a conflicting comment, Alabama Democratic Party Chairman Mark Kennedy said he agreed with the decision made by Congress to avert the fiscal cliff and vowed to stand up against those who voted against the plan approved.
“Despite the best effort of far-right Republicans in Congress, including Reps. Bonner, Roby, Rogers, Brooks, Aderholt and Bachus, hardworking families and small businesses across Alabama and the country will start out the New Year protected from steep tax increases,” Kennedy said. “Thanks to President Obama’s leadership, these hardworking middle class families and small business owners will not face higher tax rates and, as a result, our nation’s economy will continue down the path to recovery. With that said, it is an absolute disgrace that Alabama’s far-right members of Congress brought our country to the very brink of another financial crisis for political purposes and then had the nerve to not only vote against hardworking families and small businesses but also to vote for a pay raise for themselves. We will make it a mission to ensure that when Reps. Bonner, Roby, Rogers, Brooks, Aderholt and Bachus face the voters in 2014, the people who elected them will know that their representatives put their own pocketbooks ahead of the best interest of the country.”