The Money Coach
  • About
    • Meet Lynnette
    • Media Kit
  • Contact
  • Subscribe
  • Submit an Article
  • Books
  • Categories
  • Coaching
  • Book Lynnette
  • Money Coach University™
No Result
View All Result
The Money Coach
  • About
    • Meet Lynnette
    • Media Kit
  • Contact
  • Subscribe
  • Submit an Article
No Result
View All Result
The Money Coach
No Result
View All Result

The Fiscal Cliff Explained: What the Fiscal Cliff Means to Your Finances

Lynnette Khalfani-Cox, The Money Coach by Lynnette Khalfani-Cox, The Money Coach
in Personal Finance
Reading Time: 3 mins read
Facing the fiscal cliff
13
SHARES
214
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

There’s been a lot of talk in Washington D.C. and in the media about the so-called “fiscal cliff.”

But what exactly is the fiscal cliff and how will impact you and your family?

Let me offer a definition of the fiscal cliff and provide some context about how this issue will directly affect your finances.

The fiscal cliff refers to the end-of-year economic scenario facing the U.S., a scenario that could result in nearly $600 billion in increased taxes and spending cuts for Americans in 2013 unless Congress addresses some key issues by December 31, 2012.

In a nutshell, if President Barack Obama and members of Congress don’t agree on what to do about federal income taxes and hundreds of government programs, the United States could plunge over the fiscal cliff and land smack dab into another recession in 2013.

How bad would it get for the nation – and for your wallet – if elected officials can’t avoid the fiscal cliff?

The Congressional Budget Office has estimated that if the U.S. “falls off” the fiscal cliff, the economy would lose about two million jobs, and the unemployment rate would rise by nearly one full percentage point. As of this writing (in mid-December 2012), the jobless rate in America was 7.7% in November 2012.

Furthermore, failure to avert the fiscal cliff would dog the U.S. economy far beyond 2013. It would ultimately trigger more than $7 trillion in tax increases and spending cuts over a decade.

Currently, Americans are benefiting from a huge number of tax cuts and tax deductions, including a 2% temporary reduction in payroll taxes, education tax breaks, childcare tax credits, small business tax credits and more.

But since Congress couldn’t agree on a bi-partisan debt reduction plan in 2011, the Budget Control Act is slated to kick in at the end of 2012, meaning a lot of the current tax breaks and deductions are set to go away on Dec. 31, 2012. And if these tax breaks do expire, personal income taxes will rise in 2013, beginning January 1st, 2013.

What’s more, starting in 2013, spending cuts would automatically occur to more than 1,000 programs, including massive cuts to Medicare, the defense budget, and education.

One difficult cut would directly impact unemployed Americans who lost a job after July 1, 2012. Those jobless workers would see their unemployment benefits slashed to just 26 weeks of compensation, compared with the 99 weeks worth of maximum unemployment benefits that were available until recently.

Most economists predict that if we do go over the economic fiscal cliff, the typical U.S. household earning about $50,000 dollars per year would pay roughly $2,000 more in federal income taxes in 2013.

That’s a big chunk of money for a lot of people’s budgets.

Those who make less than $50,000 annually would see a smaller increase in their income taxes, while those earning more – especially six-figure wage earners – would pay a lot more, perhaps as much as an additional $10,000 or more in income taxes.

And here’s where things get tricky.

In Washington D.C., the biggest sticking point between Democrats and Republicans is over income tax rates, particularly those for wealthy taxpayers.

President Obama has proposed to increase taxes for households earning an adjusted gross income above $200,000 or $250,000 annually. The $200,000 threshold would be the marker for single taxpayers, while $250,000 would be the benchmark for higher taxes for married couples that file a joint tax return.

So far, though, Republicans have balked at increasing taxes on the rich.

And without an agreement over taxes, a series of automatic tax increases would be implemented and income tax rates would rise for all Americans in 2013.

The current tax rates in the U.S. are: 10%, 15%, 25%, 28%, 33% and 35%. Depending on your income, those tax brackets would rise to 15%, 28%, 31%, 36%, and 39.6%.

So here’s hoping Congress can avoid the so-called dreaded fiscal cliff, avoid another recession, and keep most Americans from suffering unnecessary tax increases and painful spending cuts.

Tags: Fiscal Cliff
Previous Post

At What Age Can Your Kid Start to Build Credit? The Surprising Answer

Next Post

The 3 Smartest, Best Gifts to Give Someone You Love This Holiday Season

Related Posts

divorced man sitting on steps

5 Ways to Start Over After Divorce When You Have No Money

by AskTheMoneyCoach

Divorce can be emotionally and financially draining, leaving you feeling lost and overwhelmed. If you're starting over after divorce with little to no money, it can be even more challenging. However, there are steps you can take to rebuild your life and finances. Here are five strategies to help you...

lance-grandahl

Easy Hacks to Make Money From Your Home

by AskTheMoneyCoach UK Edition

With the cost-of-living crisis continuing to stretch household budgets, cash-strapped Brits have been shown how they can boost their income from the comfort of their home. The experts at Quotezone.co.uk have named six savvy ways homeowners could make money from their homes to tackle soaring mortgage rates and general living...

black business woman in front of building

Navigating Divorce When the Woman is the Breadwinner

by AskTheMoneyCoach

Divorce is never easy, but it can be particularly challenging when the woman is the primary breadwinner. This can create financial and emotional stress, as well as societal pressures and expectations. However, with careful planning and communication, it is possible to navigate the divorce process successfully and come out on...

Mini graduation mortar board cap on money -- education cost or scholarship concept

How to Apply for a Pell Grant and Get Money for College

by AskTheMoneyCoach

Are you worried about how you're going to pay for college? A Pell Grant can be a great way to get money for school, and it doesn't have to be paid back. In this article, we'll show you how to apply for a Pell Grant and maximize your eligibility to...

Auto repair shop. Cars open bonnet parked in garage for repair and maintenance service. Car check up at service station. Car waiting for inspection in auto repair shop. Car maintenance and checklist.

How to Find Auto Repair Shops That Offer Payment Plans

by AskTheMoneyCoach

Car repairs can be expensive, and unexpected breakdowns can put a strain on your budget. But don't worry, there are auto repair shops that offer payment plans to help you get your car fixed without breaking the bank. Keep reading to find out how to locate these mechanics and get...

Two businessmen working together, forex diagrams hologram and big business data analysis. Double exposure hologram with candlesticks and chart. Concept of teamwork and trading

The Basics of Forex Trading for Beginners

by AskTheMoneyCoach

Forex trading can be lucrative for anyone willing to put in the effort to learn the basics. While it can initially seem overwhelming, with some knowledge and practice, anyone can become a successful part-time forex trader. This article will cover the ten basics of forex trading that every beginning trader...

Close up African woman outstretched hand, makes stop gesture

The Impact of Structural Inequality on People of Color

by Lynnette Khalfani-Cox, The Money Coach

Many people face challenges when it comes to money, but for African Americans and other people of color, these challenges can be even more significant. This is because there is a huge amount of structural inequality baked into every system within America – including business, educational, government, legal, and health...

Load More

Popular Posts

  • Car repair

    What to Do If You Can’t Afford a Car Repair Bill

    1523 shares
    Share 609 Tweet 381
  • What to Do if Your Spouse Stole Money From You

    1307 shares
    Share 523 Tweet 327
  • What to Do If You Can’t Afford to Leave Your Spouse

    1270 shares
    Share 508 Tweet 318
  • Here’s Why I Pay My Kids For Good Grades (And Maybe You Should Too)

    1127 shares
    Share 450 Tweet 282
  • What Do All Those Strange Codes In My Credit Report Mean?

    898 shares
    Share 359 Tweet 225
  • Which Credit Report is More Important: Equifax, Experian or TransUnion?

    864 shares
    Share 346 Tweet 216
  • Do This Now If Your Wages Were Not Reported

    852 shares
    Share 340 Tweet 213

Categories

  • Bankruptcy
  • Budgeting
  • Building Wealth
  • Careers
  • Couples and Money
  • Coupons and Deals
  • Covid-19
  • Covid-19 Video
  • Credit Cards
  • Credit Reports
  • Credit Scores
  • Crypto
  • Debt
  • Entrepreneurship
  • Family Finances
  • Featured
  • Identity Theft
  • Insurance
  • Investing
  • Loans
  • Paying for College
  • Personal Finance
  • Press Releases
  • Real Estate
  • Retirement
  • Saving Money
  • Scams
  • Student Loans
  • Taxes
  • Uncategorized

All information on this blog is for educational purposes only. Lynnette Khalfani-Cox, The Money Coach, is not a certified financial planner, registered investment adviser, or attorney. If you need specialty financial, investment or legal advice, please consult the appropriate professional. Advertising Disclosure: This site may accept advertising, affiliate payments or other forms of compensation from companies mentioned in articles. This compensation may impact how and where products and companies appear on this site. AskTheMoneyCoach™ and Lynnette Khalfani-Cox, The Money Coach® are trademarks of TheMoneyCoach.net, LLC.

©2009-2023 TheMoneyCoach.net, LLC. All Rights Reserved.

RSS / Sitemap /Submit an Article / Privacy Policy / LynnetteKhalfaniCox.com

No Result
View All Result
  • Books
  • Categories
  • Contact Lynnette
  • Get Coaching
  • Book Lynnette
  • Money Coach University™
  • Home
  • Subscribe to Newsletter
  • Submit an Article

©2009-2023 TheMoneyCoach.net, LLC. All Rights Reserved.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist