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Fiscal Cliff + 3

The US' welfare tilts on the choices of its three main domestic sectors: households, business, and government. Households provide labor and ideas while using wages and salaries for spending (often called "consumer spending"). Business provides jobs, capital investments, and the goods and services available for sale to all three sectors. Government provides infrastructure, healthy and safety regulations, laws, and collects revenues through taxes. 

All three sectors are deeply intertwined therefore the choice that one sector makes directly or indirectly impacts the others and itself. This fact shines light on the importance of the Fiscal Cliff Bill, which affects households directly and business indirectly. The newborn tax bill enacted this week leaves income tax rates where they are for 99% of households while raising them on the top 1%. 

President George W. Bush enacted lower taxes rates on the wealthy in 2001 and  2003. Those lower tax rates expired on December 31, 2012. The Fiscal Cliff Bill reinstated them and made them permanent for everyone except individuals earning more than $400,000 and couples earning more than $450,000. Their rate will rise from 35% to 39.6%, pre-Bush levels. Individuals earning $250,000 or more will lose some tax deductions. Expansions to tax credits for families, workers and college students enacted by President Obama in 2009 will remain in place for five more years. The newborn bill does not raise the debt ceiling which may lead to another showdown this March.

In summary, government benefits by collecting higher tax revenues to decrease deficits and potentially a move toward more unity. Business benefits by avoiding tax increases (they went to the wealthy 1%) in addition to having renewed assurance that the government is capable of solving our nation's most pertinent problems. 99% of households benefit by not seeing increased taxes.

Thanks for reading,

Matthew




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