A picture of the Good News from the Fiscal Cliff settlement

Nobody anywhere thinks the end result of the fiscal cliff negotiations were great. Basically, more than anything it prevented moving into a recession, pushed back automatic, non thought out drastic cuts on government spending that would have eliminated jobs and per all economists predictions pushed the US into recession again, and of course raised taxes across the board on everyone.

Yet the immediate results were a lot better than the alternative.

The graphs in this article: http://www.theatlantic.com/business...exactly-who-won-the-fiscal-cliff-deal/266744/

Portray the expected results on after tax income for Americans. The 2nd graph shows how much more after tax income folks should have as opposed to what would have occurred if the fiscal cliff had happened.

The first graph portrays the varying net income effect of raising taxes, essentially on the wealthy. High income earners after tax income will be reduced. On the other hand that money will be used to offset debt by the government.

Now of course there is a 2 month respite and the 2 parties will go to war again. Its no way to run a country.

 

The way it will effect me personally is less take home pay every check. I think I'm going to expend more effort this year in freelancing outside of my regular full-time job.

 

Well, the fiscal cliff negotiations didn't touch the 2 year break on social security taxes. so that is going up on the first $113,000 of income by about 2%. Its hit everyone. Nothing much to say about it. The GOP wanted to get rid of it last year but that didn't occur.

The social security tax is regressive. It was set in 1983, (I believe) and is indexed to the CPI. That means as inflation goes up the maximum income rate it hits goes up. Last year the max income rate was $110,000 on which it hits. This year it will be $113,000. Employers and employees both pay on it. For two years, employees had a 2% break. Also self employed, who pay the full 12%+ had a 2 % break.

One thing that sticks out is that since 1983 high income salaries have risen dramatically faster than middle income salaries and income. So the social security tax becomes more and more a hit on the lower income folks and less so on the upper income folks.

Its also a tax on employers, hitting them with a little more than 6%+ on the first 113,000 of income on any employee. If you pay someone $100,000 in income its costing you (before taxes) $106,400

 

Is the assertion here that Obama was trying to extend those social security tax rates? If so, I would absolutely love to see some evidence of that. Republicans and Democrats alike acknowledged that the Social Security tax cut was a direct attack on the longevity of social security.

To the presidents credit, it was a much more efficient and effective form of stimulus than any cash give away the Democrats normally dream up, even if it was a direct attack on the FDR/LBJ programs Democrats love so much. No bureaucrat had to be paid to first collect the money, move the money, and then redistribute what is left of the money after Washington got through taking most of it. People who worked simply were allowed to keep a few thousand extra dollars of their own money for a few years during this crisis.

Regarding regressive taxes, I love the water cooler banter about the new higher taxes on the rich. I believe the total revenue generated by these taxes is estimated to be under $50bn, which they immediately spent (and then some), on new "stimulative" items. Tell me, how would you propose keeping Social Security solvent if "taxing the rich" had no effect on it?