Wednesday, January 2, 2013

The Fiscal Cliff Deal, By The Numbers

Last night, the House of Representatives passed the Senate’s compromise bill to avert the so-called “fiscal cliff.” The bill, dubbed the “American Taxpayer Relief Act of 2012,” raised taxes on (some of) the wealthiest Americans, while punting several other budget decisions down the road, including whether or not the so-called “sequester” spending cuts will occur. Here are some important numbers from the bill’s resolution of the fiscal cliff’s tax side:

– The first major tax increase for the wealthy in 20 years. Allowing the expiration of some of the Bush tax cuts amounts to the first major tax increase for the wealthiest Americans since the 1990s.

– The Bush tax cuts expire for just 0.7 percent of taxpayers. The expiration will occur on income in excess of $400,000 (or $450,000 for a couple). This translates into “a little over 1 million Americans” according to the Tax Policy Center. The capital gains and dividend tax will also increase to 20 percent for wealthy earners.

– The top 1 percent will pay an average of $73,633 more in taxes. Bloomberg News noted that, “among households with incomes between $500,000 and $1 million, taxes would go up by an average of $14,812.”

– 77 percent of households will see a tax hike.
Due to the expiration of a cut in the payroll tax, most workers will see their taxes increase slightly in 2013. The expiration of the payroll tax cut will deal a significant blow to the economy.

– $4 trillion in deficits and $600 billion in revenue. According to the Congressional Budget Office, the bill will increase the deficit by around $4 trillion over the next ten years compared to a world in which all of the Bush tax cuts expired. However, it raises about $600 billion more in revenue compared to the policies that were in place in 2012.

– $2.50 in spending cuts for every $1 in revenue. As Americans for Tax Fairness noted, “This bill raises $620 billion over 10 years, but $1.5 trillion in budget cuts were already enacted last year; that means for every one dollar in new taxes there have been 2.5 dollars in spending cuts to reduce the deficit.”

– Two million unemployed workers see benefits saved. Without the extension included in the fiscal cliff deal, millions of workers would have seen their federal unemployment insurance pulled out from under them.

– Estate tax giveaway costs billions. The estate tax rate will increase slightly to 40 percent this year with a $5 million exemption, but it would have gone to 55 percent with a $1 million exemption in the absence of a deal. As the Atlantic’s Matt O’Brien noted, “Only 3,730 households will pay the estate tax next year if the exemption is set at $5 million, versus 47,170 if it’s set at $1 million.”

The bill also extended provisions of the farm bill that will prevent milk prices from spiking and included an important provision to help underwater homeowners.

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