Bend money expert reacts to fiscal cliff deal
Updated On: Jan 03 2013 01:00:27 AM CST
A late night vote from the House sends a bill to President Obama -- the fiscal cliff is avoided for now. But how does all this impact you? NewsChannel 21 talked with a financial expert Wednesday to find out.
The American Taxpayer Relief Act, or the fiscal cliff bill, heads off one big tax hike for most Americans.
It is the 1 percent of Americans -- those making $400,000 or more a year, or couples making $450,000 or more -- who will see an increase from 35 percent to now nearly 40 percent in their federal tax rate.
"The American people are going to learn the price in which we are paying today for a continuance of the irresponsibility of the last decade," said financial expert Bill Valentine.
Valentine finds it disturbing that its taken our elected officials this long to come up with a solution -- and it is still not an outcome he's pleased with.
"I'm upset, because I am behind the curtain," Valentine said. "I know exactly where we are, and it's frightening. We should be outraged and we are not."
While many Americans will have a taxation net benefit from the deal, Congress did not deal with another tax matter, so millions of working Americans will pay 2 percent more of their paycheck toward Social Security.
"So somebody who is making $50,000 will see ostensibly $1,000 in an increase to Social Security over the course of 12 months from where they were before," Valentine said.
Valentine said the deal offers a way to prevent the marriage penalty for wealthy couples. According to Valentine, now there will be an incentive to file separately.
"If they can split that amount of money up so that they can individually have less than $400,000, then they will and they won't be subjected to this change in the tax code," Valentine said.
But it's punitive for the wealthy.
"It's silly -- the tax code was never set up to create a penalty for married people to file jointly," Valentine said.
It's just one of the negatives for the rich.
Besides getting their top tax rate increased, the wealthy will be paying more in other taxes, including Medicare and investment.
Valentine points out that the deal doesn't solve the massive deficit problem, something we will face again in just two months.
"This crisis won't burst in the speed that the real estate bubble did, but the consequences are 10 times more dire," Valentine said.
We saw the stock market react positively Wednesday. It was up about 300 points
But Valentine says that's because in the short term, there is a stimulating effect from not increasing taxes on 99 percent of the country.
The real trouble comes down to what will happen in the long term, if there is no deal reached to cut the nation's mounting deficits.
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