The Top 3 Pieces of Financial Legislation in 2012

2012 has been an important year, not just for politics but for the financial future of the country. New financial legislation and a heated discussion about the “Fiscal Cliff” have brought the staggering debt of the US and the national deficit under popular scrutiny.

The US Congressional Budget Office has predicted a mild recession in early 2013 based on the factors that are in place to reduce the deficit, reduce spending, and increase taxes. Listed below are the top three most important pieces of financial legislation in 2012.

Bush Tax Cuts

Former President George W. Bush signed laws regarding changes in taxation for the wealthy. He signed these laws into effect in 2001 and 2003 and now at the end of 2012, they’re set to expire. They were originally meant to expire in 2010 but extended due to the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. As we approach the “Fiscal Cliff,” there’s a lot of discussion about whether or not these tax cuts should expire or should be kept in place.

The Bush Tax Cuts added a lower 10% tax bracket and reduced the overall tax rate for very high income earners. Income earned from capital gains and some dividends were also reduced. Arguably, the people most likely to benefit from these income sources are also very high income earners. The top rate is currently 15% on capital gains income sources and income from the very wealthy is 35%. In some cases, as Warren Buffett has pointed out, the wealthy pay less in taxes than middle-income earners.

Middle Class Tax Relief and Job Creation Act of 2012

This act was originally meant to bring some financial relief to the middle class, in large part due to the severe recession experienced in 2011. Now at the end of 2012, it’s set to expire, reverting back to the normal state without the added relief to the middle class. This act had three major consequences that contribute to the approach of the “Fiscal Cliff.”

  1. It delayed the Medicare Sustainable Growth Rate.
  2. It extended a 2% Social Security payroll tax cut.
  3. It extended federal unemployment benefits.
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Patient Protection and Affordable Care Act

New health care laws, especially related to governmental expenses, mean there will be added costs regarding mass health care provisions in 2013. While this will increase governmental costs, many assessments consider these measures to save costs on an individual scale due to the increase in health care quality preventing necessary expensive emergency room visits by people who otherwise wouldn’t have health care.

In part due to the approach of the “Fiscal Cliff,” but more precisely, due to the coincidental culmination of spending reduction and tax increases, 2013 is projected to be a difficult financial year, at least in the beginning.



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