What is Fiscal Cliff? “Fiscal cliff” is the popular shorthand term used to describe the conundrum that the U.S. government will face after the end of 2012, due to implementation of the terms of the Budget Control Act of 2011.
What are the changes taking place? Among the changes that are set to take place are:
- The end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers).
- The end of certain tax breaks for businesses.
- Shifts in the alternative minimum tax that would take a larger bite.
- A rollback of the “Bush tax cuts” from 2001-2003.
- Beginning of taxes related to President Obama’s health care law.
- At the same time, the spending cuts agreed upon as part of the debt ceiling deal of 2011 will begin to go into effect.
So in simple terms the fiscal cliff is the sharp decline in the budget deficit that could have occurred beginning in 2013 due to increased taxes and reduced spending as required by previously enacted laws.