Congress Passes Largest Tax Increase in Two Decades

[I AM NOT THAT GUY 5,715]

Congress broke a rancorous stalemate Tuesday to pass legislation designed to avert the so-called fiscal cliff. But the compromise bill, which blocked most impending tax increases and postponed spending cuts largely by raising taxes on upper-income Americans, left a host of issues unresolved and guaranteed continued budget clashes between the parties.

The bill represented the largest tax increase in the past two decades and was passed over opposition from conservative Republicans in the House who objected to the fact that it contained no long-term spending cuts of any significance.

The far-reaching agreement will have lasting implications for the tax code, future budget battles and the balance of power in Washington. It raises income-tax rates for the first time in almost two decades...

At the same time, the bill defers some of America's toughest spending problems—in particular the ballooning cost of health care—and it doesn't come close to the kind of $4 trillion deficit-reduction deal the country's leaders had hoped to negotiate. By some estimates, it would cut the deficit by $600 billion over 10 years.

The compromise dodges one cliff, but it sends Congress barreling toward another. In two months, the delayed $110 billion in spending cuts will again kick in. At the same time, the U.S. will face the need to increase its borrowing limit, a change that can only be made by Congress. That sets up another rancorous fight, one with potentially more damaging consequences. Republicans want to use the debt ceiling to extract spending cuts. Mr. Obama has said he won't negotiate.

The failure to grapple with the biggest budget questions disappointed business leaders who had hoped for a comprehensive budget agreement that could tackle the deficit and diminish what for some has been a debilitating policy uncertainty.

At the heart of the deal are some of the biggest tax changes in years, including an increase in tax rates for couples with incomes over $450,000, to 39.6%. For those same households, capital-gains and dividend taxes would increase to 20%, from 15%. Estate taxes would increase from 35% to 40%.

More than three-quarters of American households would see a tax increase from their 2012 tax levels, according to an analysis by the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. For households earning between $500,000 and $1 million, the additional tax owed would be about $15,000. For households with incomes over $1 million, it would average about $170,000.

http://online.wsj.com/article/SB10001424127887323320404578215373352793876.html

[Mr. Big Dog 10,747]

But the compromise bill, which blocked most impending tax increases...

The WSJ is mistaken. They are arguing from the fiction that the Bush/Obama tax cuts never expired. Fact is, they did. We all woke up yesterday morning to the same tax rates that were in effect back in 2000. And then Congress acted and cut taxes more than it has ever done in history. House Republicans by and large opposed the tax cuts. Tea Partiers opposed the tax cuts en bloc. Guess they like higher taxes after all.

Edited January 2, 2013 by Mr. Big Dog

[I AM NOT THAT GUY 5,715]

The WSJ is mistaken.

Then I guess so are all the liberal television stations in the SF Bay Area that are saying the same thing on the morning news. When everyone else seems wrong, it is time to reevaluate your position.

[Teddy B 17,252]

The WSJ is mistaken. They are arguing from the fiction that the Bush/Obama tax cuts never expired. Fact is, they did. We all woke up yesterday morning to the same tax rates that were in effect back in 2000. And then Congress acted and cut taxes more than it has ever done in history. House Republicans by and large opposed the tax cuts. Tea Partiers opposed the tax cuts en bloc. Guess they like higher taxes after all.

Exactly! The article even refers to them as "impending tax increases". How can they be impending after they actually happened?

[I AM NOT THAT GUY 5,715]

Exactly! The article even refers to them as "impending tax increases". How can they be impending after they actually happened?

As yes, the tortured liberal intellect. The net effect will not be felt until you get paid, and for 3/4's of Americans, those paychecks will be smaller in 2013.

[Teddy B 17,252]

As yes, the tortured liberal intellect. The net effect will not be felt until you get paid, and for 3/4's of Americans, those paychecks will be smaller in 2013.

Did the Bush tax cuts expire on Jan 1st or not?

[I AM NOT THAT GUY 5,715]

Did the Bush tax cuts expire on Jan 1st or not?

The Bush tax cuts expired in 2010.

[Teddy B 17,252]

The Bush tax cuts expired in 2010.

Well then, I better stay low key, cause I continued to receive the benefit of those Bush tax cuts. Hope the IRS doesn't come looking for me.

[Mr. Big Dog 10,747]

Then I guess so are all the liberal television stations in the SF Bay Area that are saying the same thing on the morning news. When everyone else seems wrong, it is time to reevaluate your position.

I will as soon as someone demonstrates how the Bush era tax rates did NOT expire. What legislation was passed and signed into law prior to the expiration (that would be prior to end of day 12/31/2012) keeping them in force? Show me that and I will re-evaluate my take on the situation.

Exactly! The article even refers to them as "impending tax increases". How can they be impending after they actually happened?

Bingo!

[I AM NOT THAT GUY 5,715]

Well then, I better stay low key, cause I continued to receive the benefit of those Bush tax cuts. Hope the IRS doesn't come looking for me.

Democrats in another midnight session, passed the Obama tax package, that maintained the tax rates for 2010, and Obama signed the bill. Same thing happened here, except this time the rates were increased for 75% of Americans.

Edited January 2, 2013 by The Patriot

[Mr. Big Dog 10,747]

As yes, the tortured liberal intellect. The net effect will not be felt until you get paid, and for 3/4's of Americans, those paychecks will be smaller in 2013.

That is because the payroll tax holiday expired just as the Bush era tax rates did on 12/31/2012. It's befuddling how people can mistake the payroll tax holiday for a permanent reduction in payroll taxes. That's always been a temporary measure. They even called it a payroll tax "holiday" to try and make it a bit clearer for the people in the cheap seats. Apparently that didn't work out.

[I AM NOT THAT GUY 5,715]

I will as soon as someone demonstrates how the Bush Obama era tax rates did NOT expire. What legislation was passed and signed into law prior to the expiration (that would be prior to end of day 12/31/2012) keeping them in force? Show me that and I will re-evaluate my take on the situation.

You can hang your hat on a technicality, or you can face reality - whatever gets you through the night. I don't care if Congress did nothing but produce flatulence for the last two years, the net result, the change between what I will paid in taxes in 2012, and what I will pay in 2013 will be more, not less.

[^_^ 5,021]

This is rarely the case, but today it is. Both sides are correct. Now please shut up.

[Mr. Big Dog 10,747]

Democrats in another midnight session, passed the Obama tax package, that maintained the tax rates for 2010, and Obama signed the bill.

The votes for the extension were bi-partisan. The Senate voted 81/19 in favor (there weren't that many Democrats in the Senate) while the House approved 277/148. Looking at it more closely, in both chambers there were more Democrats (112 in the House / 13 in the Senate) than Republicans (5 / 36) voting "No". Put differently, 23% of Senate Democrats and 45% of House Democrats voted against this bill while only 12% of Senate republicans and 21% of House Republicans were oppsed. Given those facts, it's hard to see how Democrats passed the package. Democrats did not have the votes for this package in either chamber of Congress. It took the enthusiastic support of Republicans to pass the measure.

[Mr. Big Dog 10,747]

...the net result, the change between what I will paid in taxes in 2012, and what I will pay in 2013 will be more, not less.

That is correct. And you can thank the overwhelming support of Republicans in the House and Senate for the 2010 bill for that. If they had gotten their way, your tax bill would go up quite a bit more than it now will because Democrats and a handful of Republicans decided to act last night and cut your taxes.