← 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. Leave a comment for Paul. If you would like to leave a comment for Paul, follow the link above, however, please make sure to include your email address so that he can reply to your comment (your email address will not automatically show up).

More Posts - Website

Follow Me:
Twitter

← 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

Events

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

See All

  • Twitter Feed

    I'm in Big Sky Country. Billings MT 20 hours ago

    Pre Check is now as slow as regular line at airport. 1 day ago

    Traveling to Billings for Farm Financial Standards Council annual meeting 2 days ago

    Congrats to # 24. The Chase is in for #5 3 days ago

    Got to drive a Case IH 2388 yesterday in 130+ bpa wheat for two hours. My idea of a perfect day. Have two more days end of the week 4 days ago

    Debt as percentage of farm assets will go up as farmland and equipment values go down. Where will it stop? 4 days ago

    Photo of 140 bpa wheat near Walla Walla pic.twitter.com/YsA2wPt1iH

    5 days ago

    Corn does well in Washington state. 55 at night 95 during the day plus irrigation 6 days ago

    If average cash rents drop $50 this fall and cash return is 2% equals drop in average land values of $2,500. We shall see. 6 days ago