December 31, 2012 by David K. Sutton
A Fiscal Cliff Deal? – Not Yet
I hate to be the pessimist in the room, but regardless of all the positive talk today about a potential fiscal cliff deal, nothing is done until congress votes on it. The details of the potential deal includes an extension of unemployment benefits, a patch of the Alternative Minimum Tax (AMT) so that it doesn’t hit middle class families, and extensions of the earned income tax credit and college tax credit for 5 years.
But the part of the deal that should raise some eyebrows, at least among Democrats and liberals is that taxes would go up on families making $450,000, not $250,000. That is an increase from President Obama’s previous hardline. While he can still say taxes will be increased on top earners, it’s not at the threshold he had advocated. Maybe if the deal included several tax brackets above this level at increasing rates it would be a good deal, but considering that the top rate will automatically go up to 39.6% (along with all rates) starting tomorrow, is this really a good deal? And may I remind everyone that any tax rate increase affects income above that level only. So the top tax rate going from 35% to 39.6% only affects income above that level (whether it’s $250,000 or $450,000), not all income.
And finally, the pessimist has this to say — Not only is this deal not done yet, it has not been voted on. If they do reach a deal before midnight, and if that deal includes any tax increase, it’s still questionable if it will pass the House of Representatives. It would require all Democrats to vote in favor along with a number of Republican defectors. Will any Republican choose to vote for a tax increase when they can wait a few hours and vote for a tax decrease? I’m still skeptical. It’s been well over 20 years since a Republican in congress voted to increase taxes. So this deal, if a deal even exists, isn’t done until the House and the Senate pass it and President Obama signs it.