According to the Tax Policy Center, a nonpartisan research group in Washington, the median American income is $50,000 a year and under the American Taxpayer Relief Act of 2012 which made the Bush era tax cuts permanent, you will still see about a $1,000 dollars less on your pay stub. While the bill did raise taxes for some Americans, what it did not address is spending cuts. A discussion on that, is put off for two months.
Even though the American Taxpayer Relief Act of 2012 passed Tuesday night, you will still see changes to your bottom line. With a vote of 257 to 167, the measure to avert the fiscal cliff passed in the house.
The White House is calling it relief for middle class families. Taxes will not go up for Americans making less than $400,000 a year. According to the white house, that's 98% of Americans and 97% of small businesses.
Affluent households will pay the new 39.6% rate only on income above $450,000. They currently pay 35%. They, and everyone else, will still pay lower rates on income below that threshold.
The bill extends three important credits through the end of 2018. For the first four years of your college education, you will continue to receive a $2,500 dollar tax credit. The parameters for the earned income credit have also been extended and the maximum child tax credit will continue to be $1,000.
Representative Kevin Brady, R- The Woodlands, voted for the bill. In a statement he says, "...That goal - to permanently lower taxes - is one I've fought for continually in the 11 years since the Ways & Means Committee first successfully passed the Bush era tax cuts. From this day forward it will no longer take an act of Congress to keep Uncle Sam from taking more of your money."
The deal will also restore unemployment benefits for about two million Americans - up to 47 weeks, from the current 26 weeks.
But perhaps what the bill failed to address is just as important as what it did address. The payroll tax holiday is officially expired so most middle class Americans will see 2% less in their net payroll checks, than what you saw in December. According to The Tax Policy Center, a nonpartisan research group in Washington, a household earning $50,000 in 2013 which is roughly the national median, will avoid paying about $1,000 more in income taxes, but pay about $1,000 more in payroll taxes.
The bill limits personal exemptions and itemized deductions for taxpayers making more than $250,000 (single) or $300,000 (married). So you may find that itemized tax form you turned in last year may have a fewer lines.
Representative Ted Poe, R- Humble, voted against the measure. In a statement he says, "I voted 'no' because this so-called 'deal' is toxic for American families and small businesses. Make no mistake about it: this bill is not intended to pay down the deficit. It is just another massive Washington spending bill in disguise. And the American people will once again be left to pick up the tab."
So while your bottom line is a little less, according to the White House, the bill cuts the deficit by $737 Billion dollars.
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