Official photos can be funny – this was snapped shortly after the deal went down…My colleagues have already covered some of the numbers, but Heritage has a nice digest, and some charts showing the pain caused by Obamacare taxes starting today – Happy New Year!
Unless you slept through the entire day, you probably heard that, shortly after midnight on Jan 1st,
“The Senate voted 89-8 to limit deductions for taxpayers making more than $250,000, which would raise their taxes, and to hike tax rates for those making more than $400,000.” (Heritage)
But of course, there’s more…
In their article ‘Congressional Budget Office Shows Senate Bill Is $600 Billion Tax Hike‘, Heritage has this to say:
The Senate bill is a tax hike because it allows taxes to go up from 2012 to 2013. The tax increases in the bill will reportedly raise about $600 billion over the next 10 years.
Also of note in the CBO score is that the Senate bill increases spending by around $330 billion by extending expanded unemployment benefits, a temporary “doc fix” patch to prevent cuts to Medicare, and extension of the agriculture programs.
Unfortunately for the economy, the deal struck in the Senate did not stop the entire “Taxmageddon” portion of the fiscal cliff. If the bill becomes law, the top tax rate, the rate paid by small businesses and investors — America’s job creators — would rise from 35 percent in 2012 to 39.6 percent this year for incomes of more than $450,000 for married filers and $400,000 for single filers.
True, this is better than President Obama’s initial demand for rate hikes for those earning more than $250,000. But it would still hurt job creation because it is the small businesses that employ the most workers who will pay the higher rates the Senate’s deal calls for. The accounting firm Ernst & Young found that Obama’s plan to raise rates above the $250,000 threshold would cost the economy more than 700,000 jobs. Raising the income threshold to $450,000 won’t do much to lessen the job losses.
Worse for the economy and jobs, the Senate bill increases the tax bias against investment by raising the tax rate on capital gains and dividends for taxpayers with incomes above $450,000 from 15 percent in 2012 to 23.8 percent this year (this includes the new 3.8 percent Obamacare surtax that began today). It also raises the death tax rate from 35 percent in 2012 to 40 percent in 2013. A tiny consolation for families is that the exemption will remain above $5 million and be indexed for inflation.
This summary doesn’t account for the termination of the temporary reduction in Social Security tax, which means that EVERY wage earner up to 113,000 will pay an extra 2% starting Jan 1st.
Heritage covers the tax increases on capital gains and dividends which are already baked into the Obamacare cake in their article Obama’s Dirty Little Tax Secret: He’s Already Raised Taxes on the Rich. In this chart, Heritage shows what would have happened to capital gains and dividends in the worst case – Obamacare taxes kicking in, and the Bush rates ending. However, look at the ‘capital gains’ section to see what will happen to BOTH capital gains and dividends for earners below $400k (middle column) and above $400k (right column) under the ‘deal’: