The result of the US election 2012 has finally come out. Barack Obama has defeated Romney by a huge number of votes. The nation wants Barack Obama to rule this country for the next 4 years. People want him to devise a plan that will help the country to avoid the much talked about financial cliff. Now this is a huge challenge, considering Obama has only 55 days in hand to resolve this issue.
One thing is very clear. Obama has to fight fiercely in order to avoid financial cliff for the time being. The whole nation is looking up to him and Obama has to face the challenge head-on. He has to take certain steps to change the economical condition of the country. The question is "how"?
Some people feel that Obama will raise the tax rates for the people who have a high income in the country. Much to the dislike of the Republicans, Democrats are in favor of raising the income tax rates for the high-earners. Now, that the Democrats have come into the power for the second time, chances are good that high-income households have to pay greater amount on taxes.
Senior officials in the federal government feel that president Obama will support any bill that compels high-earners to pay bigger amount on taxes. Republicans are totally against such thing. They don't want to see an increase in the tax rates. Even the speaker of the House talked in the line of the Republicans on 7th November 2012. He feels that the economical problems of the country can't be resolved quickly. He doesn't believe that the fiscal cliff can be avoided by raising the tax rates.
Obama has insisted that rich people should pay high tax. He has expressed his opinion about the Bush tax-cuts repeatedly during the election campaign of 2012 He has received negative comments over this. Some people even felt that Obama might lose the election over this single issue.
However, Obama is adamant. He strongly feels that the time has come to annul the part of the Bush tax-cuts that apply to individuals earning above $200,000. He wants to increase the top 2 tax rates, tax dividends and capital tax gains. He intends to increase the tax rate to 36 percent and 39 percent.
It is said that the Affordable Care Act will impose a new tax of around 3.8 percent on capital gains. This will move up the tax rate to 23.8 percent for individuals belonging to the high income group.
Real estate taxes may also rise in future. Currently, every tax payer is eligible for a tax credit. This eliminates the tax due on the initial $5,120,000 of an estate. The tax rate on the $5 million is around 35 percent. If Obama has his way and the Bush tax cut ends, then the exemption will fall to $1 million. This will increase the tax rate to minimum 55 percent.
On a broader perspective, these strategies may help the country to avoid the financial cliff for a short period of time. The administration will get some time to formulate a concrete debt elimination strategy that involves tax policies.