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Fiscal Cliff

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As of late, if one were to turn on the morning or evening news it is a sure bet that there would be some coverage about the Fiscal Cliff. Varying opinions and concerns about it are heard in passing around campus and probably in most courses regardless of its relevance to the material. However, until thorough research, questions about what it actually is, what led to it, and the partisan positions and implications of it were unclear. The Fiscal Cliff, which is of course not a real cliff and merely an imagery-rich term popularized and exploited by most media, signifies extensive tax hikes and automatic spending cuts that are all scheduled to take place at once in the beginning of 2013. Unless the Obama Administration and the Republicans reach an alternative agreement on deficit reduction, the country will likely face increases equivalent to up to 3-4% of current GDP, which many worry will throw us back into a recession (Calmes, 11/15/12). Tax effects include but are not limited to: the expiration of all Bush tax cuts, (part of which included provisions for lower rates in income, estate, capital gains, and dividend taxes), new taxes related to the health care overhaul, the end of the payroll tax holiday with a return to the 6.2% rate, the expansion of the Alternative Minimum Tax which would increase taxes for middle to upper income citizens, and the elimination of certain corporate tax breaks. Some of the latter business related taxes involve the end of the research and experimentation tax credit and of the credit for grants for specified energy property, and the elimination of bonus depreciation (CohnReznick 12/10/12). Across the board cuts, ranging from 7.6% to 9.6%, will be divided evenly between defense and non-defense spending, with very few programs being spared (Duncan, 12/11/12). In one respect, if nothing is done we can shave off roughly $600 billion…...

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