What Tax Hike? The Fiscal-Cliff Deal As a Tax Cut for All
January 2, 2013 = Posted by John Cassidy
What Tax Hike? The Fiscal-Cliff Deal As a Tax Cut for All
http://www.newyorker.com/online/blogs/johncassidy/2013/01/fiscal-cliff-deal-is-a-tax-cut-for-all.html
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A negotiating process that started eighteen months ago with talk of trillions of dollars in deficit reduction ended in an agreement that will hardly reduce the deficit at all. From a historical perspective, indeed, the overall impact of the compromise is to bestow another big and costly tax cut on the American populace.
How can that be so? Under the law of the land as it existed until last night, most of the tax cuts that George W. Bush introduced in 2001-2003 would have lapsed. Now, with the exception of the rise in the top rate of income tax, most of these giveaways have been extended in perpetuity, at a total cost to the Treasury that the Joint Committee on Taxation has estimated at about four trillion dollars over the coming decade.
Even by Washington standards, that’s quite a chunk of change. Rather than going to the federal government, it will be making its way into the pockets of pretty much everybody who pays taxes, even those rich folks who are supposedly being hit with a tax increase. A very useful analysis from the research and lobbying organization Citizens for Tax Justice tells the story. Taxpayers in the middle quintile of the income distribution will get an annual income tax cut of $880 relative to what would have happened if the expiration of the old law had been maintained. Taxpayers in the top one per cent, those poor benighted souls who will be forced to pay the higher top marginal rate, will still benefit from the Bush rate on the first $400,000 of their income; each will save $17,840 relative to a world in which the Bush tax cuts had been allowed to lapse.
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