I hope you don’t need $1,635, because that is what the average tax increase will be on the majority of Americans.
According to the Congressional Budget Office, 80 percent of American households with incomes between $50,000 and $200,000 will be out more than $1,600 next year. And that’s just the starter.
The much hyped last-minute fiscal cliff deal negotiated Jan. 1 between Vice President Biden, Senate Minority Leader Mitch McConnell, R-Kentucky, and President Barack Obama, cuts only $15 billion in spending but increases tax revenues by $620 billion. The 41:1 ratio of tax increases to spending cuts is no deal for Americans.
The tax increase is primarily due to the expiration of a payroll tax cut, according to the Tax Policy Center in Washington.
While the bill, known as the American Taxpayer Relief Act of 2012, will protect millions of middle-class taxpayers from tax increases set to take effect this month, it will increase tax rates on wages and investments for households making more than $450,000 a year.
This is the first time in more than 20 years that a huge tax increase has been approved with GOP support.
The measure, which addressed the tax increases while holding off sequestration cuts and the debt ceiling, passed with the support of 85 Republicans, including the Speaker who took the unusual measure of casting a vote, and 172 Democrats.
The Deal adds to the deficit
The smelly Senate deal to avoid the “fiscal cliff” will add approximately $4 trillion to the deficit, according to new the CBO, and achieves minimal deficit reduction in the early years.
“For a family making median income, they’ll notice an additional $3,500 dollar income tax increase,” Fox News reported. “27 million Americans will be subject to the alternative minimum tax, and additionally, the death tax will increase to 55 percent for estates of $1 million and over.”
The extension of lower tax rates for taxpayers, and the addition of only a patch to the insidious Alternative Minimum Tax would add more than $3.6 trillion to the deficit over the next decade, the CBO said.
Other individual, business and energy tax extenders will add another $76 billion to the deficit.
The latest extension of unemployment benefits will cost $30 billion.
The “doc fix”, a one-year payment patch for physicians who treat Medicare patients, would add $25 billion to the deficit through fiscal 2022.
One of the most egregious aspects of this bad deal is how much pork was stuffed into the bill.
* Perks for Hollywood: special expensing rules for certain film and TV productions
* special tax-exempt financing for New York Liberty Zone, an area around the site of the World Trade Center.
* extension of American Samoa economic development credit
* Green energy — nearly a dozen provisions in the bill would extend green credits and green incentives for plug-in electric vehicles, energy-efficient appliances, biodiesel and renewable diesel, and other alternative energy initiatives.
* The legislation also would kill the part of Obama’s 2010 Affordable Care Act designed to let millions of elderly and disabled people get help at home rather than be placed in institutional care, which tends to be more expensive.
Democrats acknowledge that the insurance initiative known as the Community Living Assistance Services and Support program, or CLASS, is financially flawed but they had argued it should be fixed rather than ended.
The House voted to repeal that provision 11 months ago.
* No $8 per gallon milk: the “dairy cliff” was avoided. Measures to prevent a steep increase in milk prices were averted.
I can hardly wait.
See the Final Vote Results
cross posted at CalWatchdog