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Fiscal Cliff Deal Fixes AMT, Protects Fire Fighter Benefits

January 14, 2013 -- While the agreement to raise taxes on the wealthiest Americans and delay across-the-board spending cuts avoided the January 1 deadline known as the “fiscal cliff,” the package also resolves one of the IAFF’s longest-standing tax issues. Additionally, several proposals that would have placed a huge financial burden on the nation’s professional fire fighters were dropped from the package.

Most significantly, the fiscal cliff agreement permanently fixes the Alternative Minimum Tax (AMT), which had the potential to dramatically increase taxes on middle-income wage earners, especially those who live in high-tax states and have dependents.

The AMT was first created as a way to ensure that the wealthiest taxpayers were not able to use loopholes to avoid paying any federal income tax, but because the income levels were not indexed to inflation, it eventually impacted middle-class families as well. For the past several years, Congress has enacted a temporary “patch” to prevent the AMT from harming the middle-class, but each year it became more difficult to find the money to pay for these stop-gap measures. The fiscal cliff agreement resolves this dilemma permanently by amending the underlying AMT law.

Other proposals that would have harmed fire fighters were also in the mix during negotiations, but the IAFF succeeded in keeping them out of the agreement. Proposals to tax health and pension benefits, increase the pension contribution for federal fire fighters and require all fire fighters to pay Social Security payroll taxes were all shelved as Congress scaled back the size of the year-end package.

These victories could be short-lived, however, as Congress will once again try to reach agreement on a far-reaching deficit reduction plan in the coming months. Congress is facing several important deadlines this spring, including the across-the-board spending cuts known as the “sequester,” the expiration of a stop-gap continuing resolution that is funding most government agencies, and – most important of all – the need to raise the debt ceiling to prevent the government from defaulting. Each of these deadlines will provide an opportunity for further deficit reduction.

After four years of layoffs, pay freezes and benefit reductions, the nation’s professional fire fighters have already contributed their fair share toward addressing the nation’s fiscal problems. The IAFF will be working to ensure that further deficit reduction does not unduly penalize those who have already made sacrifices.
 


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