NEW YORK ( TheStreet) -- My lifelong best friend's name happens to be Cliff, and I can't tell you the number of times recently that I've thought of bestowing on him the nickname "fiscal," or suggesting he get a vanity license plate for his car using that same term.
It has nothing to do with him, just his name. He's an incredible guy, and I've been blessed to have know him for 43 of our 46 years.
Unfortunately, " "fiscal clif" is one of those new terms you can't seem to go more than a few hours without seeing or hearing. It's seeping into our minds the same way "tech bubble" did a dozen years ago, or "bailout" did just a few years ago.
But the notion that so many changes are converging at one point in time is startling. Especially at a point in time when our national debt has not only exploded above $16 trillion, but is accelerating. This is crunch time.Yet, Mr. Market, in its ultimate wisdom, seems to be unconcerned, at this point, anyway. That's because there's some kind of compromise, at least on the tax front, that is already priced in. Whether the current tax rates will be extended for everyone, for those with income below $250,000, $1 million or what have you, remains to be seen. But the markets are expecting an extension of some sort. If you have not yet familiarized yourself with the changes, now is a good time to do so. There are some nice surprises in there for everyone, among them:
The 10% tax bracket disappears, and is replaced by 15%
25% bracket goes to 28%
28% to 31%
33% to 36%
35% to 39.6%
Lapse of the AMT exemption patch
Return of itemized deduction and personal exemption phase-outs
New Medicare tax, an additional 0.9% on wages above $200,000 for singles, $250,000 for marrieds
Unearned Income Medicare Contribution Tax, part of "Obamacare", 3.8% tax that applies to the lesser of "net investment income" or the excess of adjusted gross income (AGI) over $200,000 single, $250,000 married
Expiration of child tax credit (goes back to $500 per child under age 16, from $1,000
Lapse of qualified dividend tax treatment -- tax on qualified dividends goes from long-term capital gains rate, to taxpayers ordinary income tax rate. Increase in long-term capital gains tax rate, from 0% for those in the current 10% or 15% brackets to 10%; to 20% in the 25% bracket or higher
Expiration of the payroll tax cut. Employees' share of FICA will increase from 4.2% to 6.2%