At the end of 2011, the patch to the AMT exemptions expired. Technically, the AMT thresholds immediately reverted to their 2000 tax year levels, a drop of 26% for single people and 40% for married couples. Anyone over these reduced thresholds at the end of 2012 would be subject to the AMT.
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- Expiration of the two-year extension of the Bush tax cuts provided for in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 and
- Expiration of a Social Security payroll tax cut, most recently extended by the Middle Class Tax Relief and Job Creation Act of 2012 (MCTRJCA);
- Across-the-board spending cuts ("sequestration") to most discretionary programs as directed by the Budget Control Act of 2011.
- Expiration of federal unemployment benefits, most recently extended by MCTRJCA;
- New taxes imposed by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010;
- Expiration of measures delaying the Medicare Sustainable Growth Rate from going into effect (the "doc fix"), most recently extended by MCTRJCA and
- Reversion of the Alternative Minimum Tax thresholds to their 2000 tax year levels.
Without new legislation, these provisions will automatically go into effect on January 1 or 2, 2013, except for the Alternative Minimum Tax growth, which may be changed retroactively. Some provisions will increase taxes (the expiration of the Bush and FICA payroll tax cuts and the new Affordable Care tax and AMT thresholds) while others will reduce spending (sequestration, expiration of unemployment benefits and implementation of the Medicare SGR).
I thought the sequestration was going to be back loaded i.e. lower in the early years and higher in the later years, but apparently it is to be divided between DoD (budget authority of $712 billion in 2011) and other discretionary programs (budget authority of $556 billion in 2011) equally at $55 billion/yr over five years. Technically speaking you would think that these cuts would leave the DoD with something like $200 billion/yr and leave the other discretionary spending to $150 billion by the end of the nine years (2022). Following are some baseline figures:
For example, according to the CBO Historical Tables, defense spending (including overseas contingency operations for the wars in Iraq and Afghanistan) grew from $295 billion in 2000 to $700 billion in 2011, an annual growth rate of 8.2%. Non-defense discretionary spending grew at a 6.6% annual rate during that time, from $320 billion to $646 billion.[20]
The austerity represented by the sequester is not unprecedented; from 1990–1999, defense spending actually declined by about 1% annually, from $300 billion to $276 billion, although non-defense discretionary spending grew by 4.5% annually, rising from $200 to $297 billion.
Obama signed the Sequestration Transparency Act of 2012 on August 7, 2012 so his administration now has 30 days to provide details on how the sequestration will be implemented; however, I write this on September 10, 2012. The 30 days are passed, but I can find no details. There are thoughts that the "fiscal Cliff" will be allowed to take place and then modify it. The sequestration, however, was meant to be so bad that the "Super Committee" would act, but they didn't. Will they act to fix the "Fiscal Cliff?"
* http://www.businessweek.com/news/2012-09-09/u-dot-s-dot-fiscal-cliff-endangers-world-economy-lagarde-tells-apec
** Also see: http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/07/16/everything-you-need-to-know-about-the-fiscal-cliff-in-one-post/
* http://www.businessweek.com/news/2012-09-09/u-dot-s-dot-fiscal-cliff-endangers-world-economy-lagarde-tells-apec
** Also see: http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/07/16/everything-you-need-to-know-about-the-fiscal-cliff-in-one-post/
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