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Fast Facts: THE FISCAL CLIFF

FACT: On January 1, 2013, a number of significant tax hikes and budget cuts simultaneously become effective.

FACT: The Congressional Budget Office projects that these changes, if not stopped, will push the U.S. economy back into a recession, resulting in a 1.3% contraction of GDP in the first six months of 2013 and a 9.2% unemployment rate by the end of that year.

FACT: Federal Reserve Chairman Ben Bernanke has warned that the combination of tax hikes and budget cuts could wreck our economic recovery and trigger a second downturn if Congress fails to act.

If no action were to be taken by the fiscal authorities, the size of the fiscal cliff is such that theres absolutely no chance that the Federal Reserve could or would have any ability to offset that effect on the economy. Federal Reserve Chairman Ben Bernanke. April 25, 2012.

FACT: Upcoming budgetary changes include:

Debt Ceiling. The current debt ceiling of $16.4 trillion was expected to carry the Treasury Department into early 2013. However, the extension of the payroll tax holiday was not offset so Congress is expected to have to raise the debt ceiling in late 2012.

Sequestration Cuts. As a result of the failure of the Super Committee to reach an agreement, the automatic budget cuts of $1.2 trillion, split between defense

and nondefense spending will occur immediately in the new year.

Personal Tax Rates. Everybodys personal taxes will go up in 2013. The lowest 10% individual income tax bracket will expire, reverting to 15%. The highest 35% individual income tax rate will rise higher to 39.6%. People in between will see a 3% hike in their tax rate, on average.

Capital Gains and Dividends Rates. The 0% and 15% tax rates on long-term capital gains will expire at the end of 2012, rising to 10% for lower tax brackets and to 20% for higher tax brackets. The current qualified dividend tax rates of 0% for lower tax brackets and 15% for higher tax brackets will rise to ordinary income tax rates.

Estate Taxes. The estate-tax exemption will drop from $5 million to $1 million and the maximum estate tax rate will rise to 55%.

FACT: If Congress cancels these spending cuts and tax increases before the end of the year, the CBO estimates the economy would grow 4.4% by 2013 and employers would add two million jobs.