The U.S. Congress approved and President Obama signed a budget deal into law just in time to avoid a “fiscal cliff.”  But much harder tasks including spending cuts and increasing debt limit are still remains and deadline to address those are fast approaching.  The just approved deal will increase tax revenue for the Federal Government by about $212 billion, roughly $126 billion from payroll taxes, $24 billion from healthcare (Obamacare) taxes, and $62 billion from taxes from upper income earners.

The top one percent of Americans will pay more in taxes.  According to the approved tax legislation, top tax rate for ordinary income of $450,000 for a couple or $400,000 for a single person will increase from 35 percent to 39.6 percent.  Couples earning less than $250,000 a year will still pay 15 percent on dividends while others will pay a top rate of 20 percent.  However, the bill did not extended the two percent payroll tax holiday which was in effect for last two years.  Therefore, wages will be subject to a 6.2 percent tax for earnings up to $113,700.  The Alternative Minimum Tax (AMT) now will be indexed giving relief to more than 30 million middle income earners.