The Nitty-Gritty of Tax Deal

For many households, tax bill going up $1.6K
By Liam Carnahan,  Newser Staff
Posted Jan 2, 2013 11:00 AM CST
The Nitty-Gritty of Tax Deal
President Obama and Vice President Joe Biden make a statement regarding the passage of the fiscal cliff bill.   (AP Photo/Charles Dharapak)

We narrowly avoided plunging over the fiscal cliff, but don't pop any champagne bottles yet. Though analysts generally agree that what we got is better than no deal, the plan we got is full of holes. Here's a rundown of what the deal does and does not do:

  • Tax increases: Top earners get hit hardest, but the Tax Policy Center estimates that a full 77.1% of US households will see some sort of increase in their annual tax bill. Taxes among 80% of households making between $50,000 and $200,000 will spike an average of $1,635 per year, reports Bloomberg.

  • Top earners: The top 1% of taxpayers, those making more than $506,210, will pay an average of $73,633 more every year. For those making more than $2.7 million, that jumps to $443,910.
  • Unemployment: One-sixth of the 12 million people who are out of jobs will have their unemployment benefits extended for a year. But "the failure to extend the payroll tax cut until the unemployment rate drops below 6.5% or interest rates rise is a big negative,” one analyst tells the Washington Post.
  • Deficit: The big goal of the budget deal was to help decrease the soaring deficit, but it falls short there, too. The tax changes will bring in $620 billion of revenue over a decade, but that's a drop in the deficit bucket, says the Atlantic Wire.
  • Spending: How will the budget deal help rein in government spending? It won't. There are no spending cuts built into the deal, which is part of the reason why almost no one is thrilled about it.
  • New showdowns: Some of the provisions of the bill expire at various points this year, and the controversial defense spending cuts were delayed for only two months. Meanwhile, the Wall Street Journal points out, Obama has promised to target more tax increases—this time around he has deductions and loopholes in his sights.
(Read more fiscal cliff stories.)

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