After months of playing political chicken, Congress managed to avoid the “fiscal cliff” at the very last moment by passing what is inaccurately titled the American Taxpayer Relief Act of 2012. How is this going to impact you and me over the short run?
First, all workers will pay higher taxes this year because the payroll tax is now increased by 2%. This means that a person or couple earning $50,000 will pay an additional $1,000 in payroll taxes. On the flip side, the Bush-era tax cuts have been made permanent. This means that tax rates, capital gains taxes, and tax on dividends in 2013 will be the same as last year for all but those individuals earning more than $400,000. The legislation also provides some economic certainty for small businesses and entrepreneurs to count on which, thankfully, should translate into more job creation.
What Congress failed to address was our out-of-control spending. Remember, Congress intentionally created the “fiscal cliff” of tax hikes and spending cuts as a way to force themselves into getting serious about passing a balanced budget, reducing the deficit, and addressing entitlement reform.
Soon we’ll begin hearing of more negotiations on cutting spending with the debt-ceiling debate looming. Here is my sense of the outcome—no real progress will be made in reducing our spending and suffocating deficits.
This should not be an issue of the Republicans vs the Democrats. This is an issue that every household realizes—you cannot continue to spend more than your income without someday suffering the consequences.
So, what can you and I do? What steps should you take if you own a business? Learn and apply what God says about handling money! Become a generous giver, a consistent saver, and get out of debt. This is not rocket science. And the more of us who practice what God says about handling money, the more stable will be our national economy, and the better prepared we will be to serve others when the inevitable hard time hits our nation.
Warmly in Christ,