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Special Advertising Section Special Report: Fiscal Cliff Agreement C ongress and the President fnally came to an agreement on a resolution, albeit temporarily and at the last minute, on the so-called Fiscal Clif. Te Fiscal Clif was the combination of the end of the Bush-era tax cuts, an end to the temporary two percent reduction in the payroll tax rates, a group of budget cuts, and various other tax law changes set to take efect on January 1st. While the compromise does not satisfy both sides, and does not satisfy us due to the lack of necessary changes on entitlements and need for heavy budget cuts that were almost entirely not addressed, it does forestall many of the changes that would most negatively have impacted the economy and markets. As a result, it essentially permanently codifes the lower tax rates from the Bush tax cuts for taxpayers below a specifed threshold, as well as various credits, exemptions, and other deductions. High income earners would be impacted, however. Te largest individual change is on the tax rates for high income earners. For couples with income in excess of $450,000 and singles with incomes over $400,000, their income tax rates will be hiked back to the Clinton era tax rates of 39.6 percent on all income in excess of those thresholds. Further, their capital gains and dividend rates will also be boosted to the capital gains rates in place during the Clinton years, or to 20 percent from the previous 15 percent level. However, beyond that, we note taxpayers at these levels will also be subject to additional taxes related to Obamacare that will push their marginal tax rates to 43.4% and 23.8%, respectively. Tese taxpayers (and in fact those with even lower incomes — $250,000 for singles and $300,000 for married couples) will be subject to phase-outs on their by: John M. Roberts, Director of Research J.J.B. Hilliard, W.L. Lyons, LLC 502.588.1165 / jmroberts@hilliard.com 52 LOUISVILLE MAGAZINE 2.13