← FarmCPA Home

Does The Fiscal Cliff Really Make Drastic Cuts in Spending?

By: | Trackback URL | 1 Comment

October 1st, 2012

It seems every time I turn the TV to a national news channel that someone is always talking about how drastic the spending cuts will be if the Fiscal Cliff goes into effect on January 1, 2013.  I have always wondered what that reduction in spending would be and I ran across a study from the Congressional Research Service on what the economic effect of these cuts and tax increases are.

For FY2013, the CRS estimates that the total reduction in the deficit would be about $607 billion.  In broad strokes, this is comprised of total tax increases of $399 billion, spending reductions of $102 billion and $105 billion of other changes not associated with policy changes. 

Of the $102 billion of spending cuts, only $65 billion is associated with actual automatic spending cuts.  Most of the other cuts relates to reductions in unemployment insurance.

Therefore, only $65 billion relates to direct spending cuts.  Eliminating the 2% reduction in the FICA rate will actually decrease the deficit by $95 billion which is $30 billion more than spending cuts.

It seems like the Fiscal Cliff from a spending cut standpoint is not very high.

Individual tax increases are about $221 billion and most people assume that this is all due to the Bush Tax cuts expiring.  This is incorrect.  Almost half of this, or $89 billion, relates to the assumption that the AMT patch will not be extended.  Congress has continued to extend this AMT patch each year for several years, but once this number hits almost a $100 billion in a year, I am not sure how much longer that will continue.

Paul Neiffer

Paul Neiffer

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a partner with CliftonLarsonAllen in Yakima, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. In fact, Paul drives combine each summer for his cousins and that is what he considers a vacation.

More Posts - Website

Follow Me:

← FarmCPA Home

1 Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Subscribe to this blog by:

Previous Posts


View upcoming speaking engagements and other networking events for Paul Neiffer and CliftonLarsonAllen’s agribusiness team.

See All

  • Twitter Feed

    When "bullish" corn reports lead to flat closes what is Mr. Market telling you. Be careful. 1 week ago

    2010 spring corn price was $3.99. Only four years ago. 2 weeks ago

    Two good days to lock in decent prices on corn and beans. Did you take advantage of the opportunity 3 weeks ago

    Very little change on corn intentions in key corn belt state. Almost all reductions in fringe states such as ND down 1 million acre 3 weeks ago

    North Dakota up 1 million Minnesota up 700k and Nebraska up 600k represent almost half of the 5 million increase in bean acres 3 weeks ago

    Just spoke for 45 minutes on new farm bill to a group of 100 Minnesota and Wisconsin Co-op board members. No one fell asleep. 4 weeks ago

    Hard to beat spring time in the Pacific Northwest. 4 weeks ago

    Kansas City can be windy this time of year. Just got done taping with a farm family. Check it out on #agday next Friday 1 month ago

    I think spring has sprung in our area. 1 month ago

    April hogs 116 limit up! Can they hit 120 1 month ago