The fiscal cliff saga finally came to an end late last night, as the House passed the bill that the Senate voted on the night before. That bill, which now awaits President Obama’s signature, technically fixes the tax part of the fiscal cliff equation. But if you think we’re out of the woods yet, you’ve got another thing coming: the debt ceiling – an issue bound to cause more drama in Washington towards the end of February. In the meantime, here’s how last night’s deal will affect you:
For couples making over $450,000, income tax rates jump to 39.6%, dividend and capital gains tax jumps from 15% to 20%, while the estate tax increases from 35% to 40%.
While the tax issue of the fiscal cliff was dealt with, Congress delayed any decisions on the debt ceiling issue until two months from now. On December 31st, the United States met its debt ceiling limit, of $16.4 trillion, which means the country can’t borrow any more money. In March, we’re likely to see more drama on Capitol Hill on how to raise the debt ceiling or cut spending, which will be necessary in order for the U.S. to continue to pay its bills. The debt ceiling is how much the country can borrow – and if it isn’t raised, we’ll default on our debt and the government will ultimately shut down – pretty serious consequences!
In addition to the fiscal cliff, economists also made note of a “dairy cliff,” where milk prices would jump to $7.50 per gallon if Congress did not renew a farm bill that expired over the summer. As part of this fiscal cliff deal, the farm bill, the Food Conservation & Energy Act of 2008, was extended for another year, thus averting the “dairy cliff – at least for now.