The so-called “fiscal cliff” has been averted (for now).
A deal was reached at the very last minute, and, to save us all from their own manufactured crisis, Democrats and Republicans came together in peace and harmony (HAHAHAHAHAHA!) and voted to increase taxes on the richest Americans, extend unemployment benefits, and support renewable energy!!! (No really, they did.)
But as you may have heard, it’s not all wine and roses… Lets dive into the details and extract the good, the “meh”, and the ugly…
The good: we just passed a progressive tax! The wealthy will be paying a relatively higher income tax rate relative to lower and middle income Americans.
The meh: Obama had to, once again, back-pedal on a commitment he made. This was to absolutely positively not allow the Bush tax cuts to continue on incomes above $200K/$250K for individuals/couples. The final figure was $400K/$450k. (And must I keep explaining this? If you make $401,000 a year, only the $1,000 above the first $400K will be taxed at the higher rate.) What does non-negotiable mean to the President? Where is the line in the sand?
The ugly: The new income tax rate will affect less than 1% of taxpayers. This was a knock-down, bare-knuckle, economy-threatening battle to raise desperately needed revenues, and we only got about $600 billion over 10 years across the whole package. Consider that the U.S. managed a gross domestic product of more than $14 trillion in 2011 alone, and you’ll see what a drop in the bucket this represents.
The good: FINALLY, the capital gains tax rate went up! Yet another progressive win, the capital gains tax rate increased from 15% to 20%. This will go some way toward righting the indefensible ability for some of the very wealthiest Americans, including a small group of hedge fund managers and our very own Willard “Mitt” Romney to pay a staggeringly low tax rate on their tremendous annual earnings.
The meh: Yeah…this may sound familiar. The higher rate doesn’t apply unless you make over $400,000…not a ton of additional revenue coming out of this piece of the pie either.
The ugly: A pill that is difficult to swallow for those of us who believe, not in income equality, but in income fairness, is that many of the wealthiest individuals in this country do not earn income like the rest of us, and will continue to enjoy the fruits of a tax system rigged heavily in their favor, as they cash in on their multimillion or billion dollar stock portfolios.
The good: We raised estate taxes! FINALLY! This tends toward the progressive as well, with smaller estates exempted from taxation, while larger bequests are taxed at the higher rate. Again, we’re inching along towards the very rich paying more to reap the benefits of their vast wealth.
The meh: 5%…well, I guess that’s something.
The ugly: Errr…we’re really messing with the definition of “small” vs. “large” estates here, and missing out on a lot of potential revenue. A “small” estate is apparently $5 million for an individual and $10 million for a family. Oh, if only I could somehow squeak by on my $4.75 million inheritance…
The good: Unemployment benefits extended! The wind production tax credit stays!
The meh: The payroll social security tax holiday is over…this is basically a regressive tax, as anyone with a paycheck will get 2% less starting yesterday. On the other hand, it funds social security. A little from column A, a little from column B…
The ugly: This isn’t over yet. Across-the-board spending cuts for defense and domestic programs are still on the docket, only postponed for 2 months. Then there’s the debt ceiling, which Republicans have sworn up and down to make contingent on spending cuts at the risk of derailing the U.S. economy…again… Obama swears he won’t cave to their demands. Republicans promise they will let the U.S. default on its debts if he doesn’t…
Happy New Year!!
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