What’s in the Tax Deal
After weeks of tense negotiations and drama (a detailed blow-by-blow can be found here), Congress finally managed to solve at least part of its latest manufactured crisis. After the country had technically already gone over the so-called “fiscal cliff,” the Senate overwhelmingly passed a compromise tax plan early Tuesday morning and the House followed suit late Tuesday night after a rebellion by rank-and-file House Republicans petered out.
Here’s some numbers to know about the deal (officially called the American Taxpayer Relief Act of 2012):
– 2: The number of decades since there has been a major tax increase on the wealthy.
– 39.6: The rate those earning more than $400,000 ($450,000 for a couple) will pay, the same as under President Clinton.
– 99 percent: The percentage of taxpayers who will keep Bush-era income tax rates.
– $73,633: The additional taxes to be paid by the average member of the top 1 percent.
– 77 percent: The percentage of household who will see a tax increase thanks to the expiration of the payroll tax holiday in place over the past two years. The expiration of the payroll tax cut and failure to replace it with something similar will deal a significant blow to the economy.
– $600 BILLION: The amount of new revenue raised by the deal after accounting for money saved by decreased borrowing costs. An additional approximately $130 BILLION is saved through decreased interest on the debt.
– $1.8 TRILLION: The amount of spending cuts put in place by President Obama so far, resulting in a roughly 2.5:1 ratio of programmatic spending cuts to revenue.
– 2 MILLION: The number of unemployed Americans whose extended unemployment benefits will continue.
– 20+ MILLION: The number of people who benefit from vital tax credits for students and both poor and middle class families that were extended for five years.
– 37,000: The number of jobs saved by the extension of wind energy tax credits.
– 3,730: The number of households that will be subject to the estate tax, the rate of which was increased slightly to 40 percent with a $5 million exemption. Without a deal, the rate would’ve reverted to 55 percent with a $1 million exemption. 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 deal also many other provisions, including help for underwater homeowners. Another element of the deal prevented a huge spike in the price of milk that would’ve occurred because House Republicans refused to pass a Farm Bill. Numerous special interest tax provisions, including for NASCAR and rum, also made it into the final package.
The deal also puts off automatic spending cuts known as a sequester for an additional two months. The president and Congress must now identify hundreds of billions of dollars in additional savings and revenues in order to cancel the remainder of these across-the-board spending cuts. While Republicans are once again likely to demand massive cuts to programs like Medicare and Social Security, the president reiterated that the next phase of deficit reduction must also be balanced.
Separately, we officially reached the nation’s borrowing limit on December 31 and extraordinary measures will only prevent the nation from defaulting on its obligations for approximately two months. Congress must do its job and raise the debt ceiling in order to make good on the cost of tax cuts, wars, and other spending Congress has already authorized. As the president noted last night, raising the debt ceiling is not up for debate and we will not repeat the debacle Republicans caused in 2011 when they nearly forced the nation into a default that would’ve triggered a global economic calamity.
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