As 2012 came to a close, Congress created a deal to prevent the country from going over a “fiscal cliff.”
After having 507 days to address the problem, the Senate agreed to a deal three hours before the deadline. This deal prevented the country from spiraling off the proverbial cliff, and 21 hours later, the House of Representatives approved the deal. The resolution led to an extension of the Bush tax cuts for middle class families while also creating a 2 percentage point increase in the payroll tax rate for most workers.
Unlike other parts of the resolution, the 2 percentage point increase directly affects more consumers by making their paychecks smaller. Sean Snaith, a U. Central Florida economics professor, said the payroll tax raise will impact those working students while also affecting faculty and staff.
“It is going to impact working UCF students; they are going to see 2 percent[age points] less in their pay checks. That affects everyone. People across the spectrum are getting less, from millionaires to the middle class to the working poor,” Snaith said.
UCF freshman health sciences major Kim Tran will face financial consequences from receiving less of her paycheck due to the resolution.
“It’d definitely be harder to pay for my car payments and my credit card bill. I mean, each month I’m gonna be spending about $500 for my car and gas, so I definitely won’t be happy,” Tran said.
The Bush tax cuts were extended for people who make less than $400,000 and families that make less than $450,000.
“The fiscal cliff extended tax cuts for middle class families — that’s $2,000 that middle class families and students can put towards paying the cost of tuition and books,” Brian Zagrocki, a freshman economics major, said. “The middle class tax cut also gives our families money that would prevent UCF students from taking out an additional student loan.”
Snaith also talked about the benefit of having the extension of the Bush tax cuts.
“The benefit, besides for people making $400,000 above, is the agreement keeps the Bush tax rates so income taxes will not go as scheduled. Future negotiations may change that though,” Snaith said.
Zagrocki believes the fiscal cliff results will help middle class families and students.
“Extending the tax credit for the middle class was very beneficial to the economy, since we need a strong middle class in order to grow our economy. We need an economy that is grown from the middle out, not the top down,” Zagrocki said.
Snaith, on the other hand, said that due to the increased payroll tax rate, the middle class would have less spending money to put back into the economy.
“It is a loss of disposable income. This simply means that there is less money to spend in consumers’ pockets. It will impact purchases of food, clothing, health care, you name it,” Snaith said.
Justin Karpf, a UCF senior legal studies major, thought the resolution, with its flaws, did do something for the economy.
“It was far from perfect, but it was better than doing nothing,” Karpf said.
While the fiscal cliff was averted for now, the question of the debt ceiling and spending cuts were delayed for two months, according to the Huffington Post.
“What they did is they basically created a new fiscal cliff, but a smaller one. None of the tax stuff will affect students because students are poor,” UCF senior economics major Isaac Fratti said. “If we go over this new cliff, it will slow the economy.”