US Economy Could Withstand Brief Fall Off 'cliff'
â¿¿ About a third of the tax increases wouldn't touch most Americans. Some would hit businesses. Others, such as higher taxes on investment income and estates, and the expiration of middle-income tax credits, wouldn't come due until Americans filed their 2013 taxes in 2014.
â¿¿ If a deal seemed imminent, some experts say the Internal Revenue Service could delay the increased tax withholding that's due to kick in. Without a deal, the top income tax rate for single people with taxable income between about $36,000 and $88,000 would rise from 25 percent to 28 percent. A delay in the increased withholding would ease the initial tax hit.
â¿¿ About $85 billion in spending cuts to defense and domestic programs would take weeks or longer to take effect. That means government agencies wouldn't cut jobs right away.
Still, if budget talks dragged on, many businesses might put off investment or hiring. That's why most economists say it would be crucial to reach a deal within roughly the first two months of 2013.Already, uncertainty is causing some businesses to delay spending. Consider Apex Tool and Manufacturing, a 10-person shop in Evansville, Ind., that makes parts for the automotive glass, telecom equipment and plastics industries. Sales have picked up. Company President Terry Babb says he'd like to spend about $150,000 to buy a computer-controlled milling machine. A couple of years ago, Apex earned too little for Babb to even worry about taxes. Yet he's reluctant to absorb new costs until he's sure what tax changes are coming. A tax break for companies that invest in new equipment is set to expire. Companies can't claim that break unless new equipment is on site before year's end. Machinery can take weeks to arrive, meaning it's too late for Babb to claim the credit this year.
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