What is the American Taxpayer Relief Act Of 2012
President Barack Obama signed the American Taxpayer Relief Act of 2012 into law on January 2, 2013. Many tax cuts enacted between 2001 and 2010 were made permanent under the legislation, while numerous other types of tax relief were extended for up to five years.
BREAKING DOWN American Taxpayer Relief Act Of 2012
The American Taxpayer Relief Act of 2012 (ATRA) was enacted to prevent the implementation of a series of economic austerity measures known as the fiscal cliff on January 1, 2013. In February 2012, Federal Reserve Chair Ben Bernanke adopted the word to represent a combination of tax hikes and expenditure cutbacks outlined in the Budget Control Act of 2011. ATRA solely addressed the taxing side of the impending fiscal cliff. Federal expenditures would be evaluated as part of the sequestration process a few months later.
The enactment of ATRA preserved most of the key tax cuts passed between 2001 and 2010 from expiring. It extended the tax breaks contained in the 2001 Economic Growth and Tax Relief Reconciliation Act and the 2003 Jobs and Growth Tax Relief Reconciliation Act. The American Recovery and Reinvestment Act of 2009’s tax cuts were extended till 2017. Along with these prolonged tax cuts, ATRA increased payroll taxes for ordinary Americans and repealed tax cuts for the richest earnings that had been approved with George W. Bush’s backing. The White House projected at the time that the measure would lower the budget deficit by $737 billion.
Political Considerations of the American Tax Relief Act of 2012
As the fiscal cliff neared in the latter months of 2012, Congress contemplated three options. First, it may do nothing and let the budget cutbacks and tax hikes take effect. Most analysts think that doing so would have impeded economic development to the point of causing a new recession in the United States. The political consequences for members of Congress would have been as disastrous. The second alternative was to enact legislation that would repeal the whole austerity plan. This course would very certainly have increased the national debt and jeopardized the federal government’s credibility. A third choice offered a happy medium. This was a mix of expenditure cutbacks and tax hikes aimed to keep the country’s debt from rising further. Republican members of Congress were highly opposed to tax and expenditure cutbacks, but were eventually convinced to accept a small number of politically acceptable tax hikes. Congress eventually chose the third alternative, enacting the ATRA tax measures with the purpose of addressing expenditure cutbacks during the ensuing sequestration process.
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