Fiscal Cliff deal won’t save you from all higher taxes
(CNN) — Now that the House has passed a Senate deal to avert the fiscal cliff, it will become law when President Obama signs it. He has returned to Hawaii to join his family on vacation.
Here are five things to know about the complex bill, and what it does and doesn’t do:
1. No side won
Republicans accepted higher taxes for the wealthiest Americans. Democrats accepted a higher threshold for how much income will face a higher tax rate. President Obama broke a vow to raise tax rates on annual household income over $250,000 and individual income over $200,000. And that’s just for starters.
2. We may have a new definition of ‘wealthiest Americans’
President Obama made raising tax rates on the top 2% of earners in America a centerpiece of his re-election campaign. The 2% figure includes those with income over $250,000. The compromise bill changes that figure. Tax rates will go up only for individuals with income over $400,000 and families earning more than $450,000.
The deal does, however, cap some deductions for individuals making $250,000 and for married couples making $300,000. That allows the president bragging rights to say the deal raises taxes on people at those income levels. But he said just weeks ago that capping deductions at the $250,000 level would not be enough and that tax rates would rise.
3. The deal kicks the can, and three more fiscal cliffs are looming
The deal delays the sequester, a series of automatic cuts in federal spending, for two months. In the meantime, the Senate plan calls for $12 billion in new revenue and another $12 billion in spending cuts. The spending cuts are to be split between defense and nondefense spending.
So the deal adds another battle to this year’s docket of apparently inevitable congressional squabbles over money. The other two: the debt ceiling and a continuing budget resolution.
4. The majority of House Republicans opposed it
Although House Speaker John Boehner supported the bill, the No. 2 Republican in the chamber, Majority Leader Eric Cantor, opposed it, as did most Republicans in the House. So while the Senate vote was an overwhelming 89 to 8, the House vote was 257 to 167. The vast majority of House Democrats supported the bill.
5. Your paycheck is still likely to shrink
The deal does not address an increase in payroll taxes. No legislation to address the fiscal cliff is expected to. Now, the cut on those taxes has expired. Americans earning $30,000 a year will take home $50 less per month. Those earning $113,700 will lose $189.50 a month.