In an unusual act, Congress convened and passed a big time piece of legislation on a major holiday – New Year’s Day.
The bill, the Taxpayer Relief Act of 2013, prevents the country from slipping off of the so-called fiscal cliff and it seems to have worked–at least temporarily. Instead of collapsing on the first trading day of the new year, the financial markets had a strong rally on news of the passage of even an imperfect bill.
What Just Happened with Congress and the Fiscal Cliff?
The fiscal cliff negotiations were originally expected to include tax issues, spending, deficit reduction and even a hint of real tax reform. Nothing that dramatic came about, but here are some highlights of what has been delivered:
- Most Bush-era tax cuts have been made permanent
- Jobless unemployed insurance benefits for 2 million long-term unemployed were extended for a full year
- A Medicare reimbursement cut of 27% has been prevented
- The top tax rate has been increased from 35% to 39.6% for individuals earning over $400,000 and couples earning over $450,000
- Taxes on high income taxpayers will also increase on income from capital gains and dividends as well as inherited estates
- Blocked a provision that would have made millions of middle class taxpayers subject to the Alternative Minimum Tax (AMT)