Small Businesses and the Fiscal Cliff Deal

BY: ON THURSDAY, JANUARY 03, 2013

While many Americans were ringing in the New Year, there was heavy tension in Washington concerning the infamous fiscal cliff. Much-hyped for months on end, the fiscal cliff was the talk of the nation as it seemed that going over the proverbial edge was inevitable. With neither side looking likely to budge during the closing days, many economists predicted another recession.

A last-minute deal, however, has managed to ease those fears and put an end to the budget saga that has dominated Washington since the Election.

Contentious negotiations between Vice President Joe Biden and Republican Senate leader Mitch McConnell ultimately resulted in a resolution in the form of the American Taxpayer Relief Act of 2012. The measure passed 89 to 8 in the Senate, with three Democrats and five Republicans voting against it. The bill was passed at 2:00 AM on New Year's Day and was almost immediately pushed forward to the Congress. While there was speculation over Congressional support for the bill in its current form, it passed the House without amendments by a margin of 257 to 167 on 11:00 PM the same day.

In short, talks truly did stall until the very last minute

So, a deal has indeed been struck; however, what exactly does that mean?

The most talked-over and notable aspect of the deal remains a tax increase of wealthy Americans, with tax rates rising from 35% to 39.6% for individual incomes over $400,000 and couples over $450,000; meanwhile tax deductions and credits beginning to dissipate for incomes as low as $250,000. Raising taxes on such high-income individuals seemed to be an inevitable outcome of the legislation, with both sides fighting over who was considered to be “high income.”

“While neither Democrats nor Republicans got everything they wanted,” President Obama said of the legislation, “This agreement is the right thing to do for our country and the House should pass it without delay.”

While the passage of the legislation does well to quell the fears of another recession, the deal is certainly not all sunshine in the eyes of Washington. Some Democrats were critical of the bill for not raising additional tax hikes, meanwhile Republicans remained critical of the lack of explicit spending cuts. Ultimately, it seems that many politicians gave up on certain details in lieu of a deal for the sake of the American people. While some may see this as bipartisanship, others may see it as weakness in Washington, Regardless, leaving such legislation to the last minute often results in rushed deals that are less-than-ideal for both sides.

Certain details of the fiscal cliff deal may or may not feel like a victory; however, perhaps it's telling that a deal managed to come together at all.

But still; what does the deal mean for small businesses specifically?

Simply put, the deal eases some of the discomfort that has been plaguing small businesses for so long. With a deal comes expectations, and with such expectations small business owners aren't left in the dark. Whether or not the guidelines laid out in the deal benefit a particular business or not, the fact remains that at least there's something to work off of.

The cuts, hikes and breaks will ultimately impact small businesses and their families across the nation, for better or for worse. It'd be easy to play a “what-if” game of the current legislation versus the prospect of another recession, but perhaps it's more pertinent to consider that the debate itself is over. As small businesses are no longer scratching their heads when it comes to the fiscal cliff, such business owners may come to make well-informed decisions concerning the future of small businesses in 2013 with knowledge of what's to come.

The New Year represents a fresh start; with the fiscal cliff deal, small businesses can move past the aura of the unknown and finally get down to business.

About the Author

Brent Barnhart

Brent Barnhart is a freelance content writer specializing in topics such as Internet marketing and content marketing for small businesses. His goal is to help business owners find their voices online and improve their content strategies. You can reach Brent or find out more at brentwrites.com.

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