Q&A on the 'fiscal cliff' as deadline looms | GoErie.com/Erie Times-News

Published: December 9, 2012 12:01 AM EST
Updated: December 8, 2012 10:32 PM EST

Q&A on the 'fiscal cliff' as deadline looms

Erie Times-News

What you should know about the 'fiscal cliff'




Q) If that's all that is involved, what does all of the talk of deficits, debt ceilings and other taxes have to do with the cliff? The roots of the current deadline are in the Budget Control Act of 2011, a product of political gridlock. Congress had to increase the debt limit so that the government could continue to borrow money, but conservatives balked unless the increase was coupled with spending cuts. When the dust cleared, caps were placed on some spending, the debt limit had been increased by $2.1 trillion and a so-called "supercommittee" of Congress had been charged to find spending cuts worth $1.2 trillion over 10 years.


Q) Were $1.2 trillion of spending cuts found? No. Because the supercommittee couldn't reach agreement, automatic spending cuts will be triggered beginning Jan. 2.




Q) Is it just the income tax rate at stake? No. There are a range of tax policies that expire at the same time. Business tax breaks and limits on the alternative minimum tax also expire. About 4 million pay the AMT, but that number could jump to around 28 million, adding $3,700 a year in taxes to many bills. Also scheduled to end is the holiday on the payroll tax. If that is not extended, the typical worker will have to pay another $1,000 a year in taxes.




Q) What happens if the parties can't agree? In the short-term, probably not much. However, the parties are flirting with another round of recession longer term.

SOURCE: Los Angeles Times