Fiscal Cliff Averted: What You Need to Know

After many months of heated debate, Congress passed the American Taxpayer Relief Act of 2012 (“ATRA”), which President Obama signed into law on January 2, 2013, averting the tax side of the so-called “fiscal cliff”. ATRA permanently extends the middle-class tax cuts, raises income tax rates on the wealthiest and, hopefully, will bolster economic growth. The legislation raises an estimated $600 billion in revenue and postpones the Budget Control Act sequestration for two months to give Congress time to work on a combination of additional revenue and spending cuts in a balanced manner. However, the word “permanent” cannot generally be relied upon on Capitol Hill, and continuing debates over taxes and spending loom due to discussions on the debt ceiling, the sequester and the budget resolution.