Hi Ho, Hi Ho, It's Off the Cliff We Go

jakke:

The fiscal cliff refers to a combination of expiring tax breaks and automatic budget cuts, all of which hit on Jan. 1, 2013. Some economists have estimated that this puts as much as 3.7 percent of U.S. GDP growth at risk in 2013, with all the implications that could have for a possible U.S. or even global double-dip.

The Congressional Budget Office estimates the fiscal cliff, if it is reached without any legislative amendment, will result in tax increases and spending cuts that would increase federal revenues by 19.6 percent from 2012 to 2013 and reduce total federal spending by less than 1 percent.

The cliff comprises:

• The expiration of Bush-era tax cuts, enacted in 2001 and 2003, effectively reinstating the top income tax rate of 39.6 percent from the current 34 percent. Capital gains taxes would rise from current 15 percent to 23.8 percent. (The average tax rate would rise from 19.3 percent to 24.3 percent, according to the CBO). This would amount to about 2 percent of GDP.
• The effects of automatic spending cuts caused by the gridlocked budget talks of late 2010, when an inability to agree on fiscal plans led to the passage of the Budget Control Act of 2011, which sequesters up $65 billion—a hit of over 1 percent of GDP.
• The expiration of a 2 percent reduction in U.S. payroll taxes, along with some depreciation advantages for capital purchases.
• The extension of the Alternative Minimum Tax, which defrays taxes for the poor by levying them on families with incomes over $50,000, would spread to a vastly broader swath of society. It currently affects 4 million U.S. households, but without congressional action, it would affect 21.7 million households. Congress has routinely intervened to prevent families making under $150,000 from being affected, but in this year’s partisan atmosphere, this cannot be taken for granted.

So this should be exciting to deal with after the election, right? No better time for bipartisan cooperation. Especially if the Republicans know they’ll be in control of the Senate and/or White House in January.

Honestly not sure how much of this can be undone retroactively - anyone know how that works? The spending cuts almost definitely can’t.