The Fiscal Cliff Deal

            As the fiscal cliff quickly approached, a decision was finally made to avert it. President Obama signed it into law a day after the House and Senate approved the legislation. Here are some main points of the deal that was made:

            A payroll tax reduction that was enacted in 2011 was not extended, leading to an increase in payroll taxes. The goal of this tax cut was to give workers more take home pay in order to stimulate. That cut ended in 2013, and since it was not renewed, the payroll tax will increase. Before the tax cut was enacted, the payroll tax was 6.2 percent, brought down to 4.2 percent in 2011. Since it ended, the tax will return to 6.2 percent. Employers have until mid-February to begin taking the added money out of paychecks.

            Estate tax rates will rise from 35 percent to 40 percent for estates valued for more than $5 million dollars. Republicans did however succeed in building in a provision, which allows the amount of the exemption (currently five million dollars) to be indexed to the rate of inflation.

            The bill also extends unemployment insurance for those actively seeking a job. It also delayed the sequestration, which would take multiple thousands from the budget. The sequestration was pushed back by two months. About half of the budget will be made up for through defense cuts, and the other half will come from non-defense cuts in spending.