WASHINGTON — A last-ditch tax deal in the Senate might let the U.S. economy escape the worst of the so-called fiscal cliff and avoid going back into recession. But even if the House goes along, the tax increases likely coming in 2013 will dent economic growth anyway.
In the early hours of the new year, the Senate voted to end a long stalemate and raise taxes on upper-income households, extend long-term unemployment benefits and postpone decisions over government spending cuts, officials said. But any deal needs approval from the House.
About $536 billion in 2013 tax increases were scheduled to take effect Jan. 1, along with $109 billion in cuts from military and domestic-spending programs, if Democrats and Republicans could not reach agreement.
Mark Vitner, senior economist at Wells Fargo, said he expects budget policy, including the higher taxes in the Senate plan, to shave 0.8 percentage points off economic growth in 2013. The economy doesn't have much growth to give. Vitner predicts it will grow just 1.5 percent in 2013, down from 2.2 percent in 2012.
The biggest hit to the economy is expected to come from the end of a two-year Social Security tax cut. The so-called payroll tax is scheduled to bounce back up to 6.2 percent from 4.2 percent in 2011 and 2012, amounting to a $1,000 tax increase for someone earning $50,000 a year.
"Even with this deal, fiscal policy will still be a net drag on economic growth," Vitner said. "The expiration of the payroll tax holiday will reduce after-tax income for all workers and hit lower to middle income families the hardest."
Mark Zandi, chief economist at Moody's Analytics, calculates that the higher payroll tax will reduce economic growth by 0.6 percentage points in 2013. The other possible tax increases — including higher taxes on household incomes above $450,000 a year — will slice just 0.15 percentage points off annual growth, Zandi says.
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Comments » 36
badgerfan writes:
Someone has to pay for two unfunded wars and the money lose from the Bush tax cuts when we had a surplus that could have been used to expand jobs thru infrastructure and more non-fosil fuel expansion !
I'm sure those making $750,000 a year can survive losing $12,000 but probably a lot less in actual tax rates due to deductions and loopholes still present !
lemonjello writes:
Your guy has been there for FOUR years! Are you still blaming Bush? Tell the POTUS to get his head out of his rear and start doing SOMETHING other than spending. Drill Baby Drill!
theataman writes:
I'm blaming those politicians who are obviously part of the problem, rather than the solution, such as Michele Bachmann and all the other right-wing ultra-conservative wing-nuts - and so are some of the voters in her district:
"In what will more than likely be the last legislative action Michele Bachmann will make as a representative of the Stillwater area, the Sixth District Congresswoman on Monday introduced legislation that would rescind the portion of President Barack Obama’s executive order that gives members of Congress a pay raise.
“I am calling on my colleagues in the House and Senate to rescind President Obama’s executive order that gives members of Congress a pay raise,” Bachmann wrote in a statement. “This executive order was not requested by Congress and we should reject it. We have a spending problem in our country and we should be looking for areas to cut spending. At a time when families across the country are cutting back we should not increase government spending and add to the debt burden by giving members of Congress a pay raise. We need to begin with ourselves and I urge my colleagues to join me in this effort.”
~ Stillwater Patch
Sam Curitiba – Stillwater constituent
9:18 pm on Monday, December 31, 2012
"When Michele Bachmann was still fondling her hat in the presidential nominee ring, I sent an email to her official web site and suggested she consider a responsible gesture that would be sure to garner positive attention (desperately needed as the gaffes piled up): She should prorate her annual $174,000 plus expenses ($52,000 in 2011) paid by taxpayers and return money for the time she spent in self-promotion and stumping for office instead of doing her elected job and representing the Sixth District in Congress. Not surprisingly, I never received any acknowledgement of my suggestion. This appeal is obviously part of another agenda, yet to be disclosed."
GTR5 writes:
All of those elected putes in Washington should be tarred and feathered and run out of town.
elf writes:
I guess everyone forgot 9/11 and Hurricane Katrina which took a big bite of all our tax dollars. Going on the comments we keep seeing, maybe we should abandon the war on terror and let those suffering the aftermath of Sandy fend for themselves. Funny how these things get forgotten when they need to pass on blame.
Bramble writes:
Having no legislation is better than having a bad bill. This "compromise" only raises revenue and does not address spending.
After all their complaining and threats, Congress wants to just pass hard decisions onto the next Congress. So why even vote on this one little piddling giveaway?
This compromise resolution falls far short of anything worth doing.
jerseyguy writes:
Well it's nice to know that it's all going to a good cause. Wars we can't win, billions to countries that hate us, etc., etc. I feel proud to help...
puckdog writes:
more non-fossil fuel expansion??.......how many more SOLANDRAS do you think we need??........Yea....blame Bush some more!!.........
Redshoulderedhawk writes:
This article is opinion, not news. Raising taxes on millionaires and billionaires will hardly curtail economic growth. Reagan and Clinton raised taxes and the economy boomed. Bush's tax cuts for rich folks--the supposed "job creators"--have been in effect for eight years now. Where are the jobs from the "job creators"? Republicans will never win another national election if they don't join the real world.
starvingartist writes:
Taxes will increase for about 80% of the population as the higher social security tax, Obama Health Care tax, etc, etc kick in. And you thought it was just those evil millionaires that would see higher taxes...LOL
Lady, you knew I was a snake when you picked me up.
Patton writes:
Precisely!!
Magic81 writes:
You don't erase 8 years of budget deficits and doubling the unemployment rate that quickly. It is foolish to exonerate Bush from the undeniable economic situation he left in 2009. The news reports the economic recovery in Lee and Collier to be the story of the year for 2012. And Obama has done nothing in 4 years--sure. Maybe you should have watched the program last week on the way Osama Bin Laden was located and taken care of. Seems like the auto workers in Detroit thought that Obama was doing something. Seems like the President and Vice President have been very busy the last week or so especially, probably saving you some tax money as well as saving the previously mentioned economic recovery. I'll get the rest of the list posted.
Magic81 writes:
Common sense shows the "jig" was up when 2 Presdidents named Bush with skyrocketing deficits and unemployment rates were sandwiched on both sides of a President with 3 consecutive balanced budgets and a drastically lowered unemployment rat from what he inherited. With "common sense", we may get back to those days. It is always amazing to see people either ignore or try to explain away the same type of statistical evidence that they like to use against the current President. Anyone care to see the proof again??--
baldygrandpa writes:
This whole situation is hilarious. What is it about when you're in a hole stop digging that republicans don't understand? Mid terms are going to be a bloodbath. Contrary to popular opinion the American electorate are not totally stupid. Just a little bit. Taking bets. House and Senate, Dem next go round. Remember, you read it here first.
puckdog writes:
Here .....let me help you........IT'S BUSHES FAULT!....IT'S BUSHES FAULT!!......now.....where's all my free stuff??..........I was promised if I voted for Obama that I would keep gettin my free stuff???.........hopey/changy...Baby!!....
puckdog writes:
"hilarious"......yea!....lets put liberals COMPLETELY IN CHARGE.......just like California and Illinois....run by democrats.....right into the ground......
MisterK writes:
Americans must step back from the divisional battle lines and look at what happened 12 years ago. The left and right certainly have arguments that are worth the time for debate. But, before that, let's look at the big picture. Are your voices being heard in Washington? For most of us, the answer is no. Our "representatives" are being ridden by a larger, darker influence than us rank and file U.S. citizens. 9/11 has had a huge influence on U.S. policies. It's all based on the actions of 19 Arab hijackers. And, that's the flaw we've been paying for. The fruits of our labor were hijacked. We've been duped. The largest financial scam in modern history took place on 9/11. It's time we face the facts and realize the elements that were responsible for 9/11. And, how America has suffered greatly at the hands of...
puckdog writes:
And you stupid story has WHAT to do with California and Illinois being DESTROYED by foolish liberals like YOU??....Ohhhhh.....thats right ...If you can't answer the question...try lots of B.S.......maybe they wont notice!!........
Patton writes:
Another malcontent.
Watasha writes:
BARACK, BARACK, BARACK!!!!!!
big_peach_e writes:
And the Tea Party loonies circle the toilet bowl, soon to be flushed down to the sewer where they belong.
Pragmatic1 writes:
We are currently at the lowest tax rates in history while we are in the worst financial straights we have ever been.
No Increase in Taxes?
Republicans have got to be kidding!
Magic81 writes:
Just keep avoiding the engaging in wording that you probably think strengthens your indefensible positions.
Magic81 writes:
Do you ignore long term causes in regards to ALL of the many misfortunes that I am pretty sure must be afflicting you?
Magic81 writes:
Great--passed the tax proposals--even Boehner decided to vote and voted YES--Reason prevails (to some extent)--what exemplary leadership skill seen from the White House to avoid the cliff
profiler writes:
When the majority votes for more than it pays into the system don't expect the outcomes to be different. If you think amerika is broke now just wait ten years. YOU AINT SEEN NUTHIN YET! I will be here saying I TOLD YOU SO!
Sig heil comrades...welcome to the ussa
profiler writes:
Everyone's paycheck just got reduced by 2% (cept the crooks in congress..that just got a pay raise while representing the citizens LOL). So, all the left wing goons that voted for more free phones will start paying for them. IRONIC!
sig heil comrades...pass me my free bozo phone
SeaJD writes:
Our system is unwieldy but works over time. Good for Boehner standing up to the Tea Party "just say no". Paul Ryan voted yes to showing that he is learning compromise. Neither side is fully happy which is good. Rubio in the Senate had a lot to learn about incremental steps in governing. Next comes the tough decisions on costs to cut. Hopefully, without a block by far right Republicans the middle can reason together again
Magic81 writes:
Be sure to connect to prior leaders who pay increases for themselves---no Congressional pay raise since 2009. Here's a peek into the past to put things in perspective
" Both Bush's hiked the presidential salary. Bush Senior increased it from Reagan's 90K to 187K and Bush Jr doubled that for himself so both Bushes are greedy men espeically since they are already Billionaires to begin with.
Not say that Congressional pay and health care benefits don't need to be looked at--just don't do what we see so often here--blame the current President and absolve prior administrations from any blame.
Arushure writes:
It's absolutely obscene to call the return to normal Social Security taxes an "increase." It's obvious that in this country the idea of "temporary" always gets abused.
The reduction should never have happened in the first place and it set a bad precedent of tinkering with Social Security.
In any case, the money lost to the fund because of the reduction had to be replaced from the general budget, and THAT money comes from taxes anyway. So there was no tax reduction.
BillyBob1 writes:
I agree. The best thing that could happen is for b---- to be replaced by someone with a spine this year. This was just more kicking the can down the road.
BillyBob1 writes:
In "history"? Your books must not go back very far. Just look at what taxes were in say 1900. We had no SS, medicare or income taxes, zero. We still had a military and all of the government that we needed. Now we take money from every American that earns it and give it away to people, industries and nations that do not.
Magic81 writes:
FACT CHECKER--CLAIM IS MOSTLY TRUE
The extent that people will go to to skirt the issue at hand--OK, let's be focused on more recent history--examine these 2 site for factual data and then assess the relative rates of today--without bias if that is possible:
EARNED INCOME --Hint--since 1931 there were actually 4 years with maximum rates lower than current 1987-1992 Reagan and Bush 41--most all other years were much higher
CAPITAL GAINS TAX--Now the lowest BY FAR going back to 1954 which is as far back as the chart goes
http://www.taxpolicycenter.org/taxfac...
http://www.outsidethebeltway.com/hist...
Magic81 writes:
PS==the initial claim was about TAX RATES--and these rates were including when we had Soc Sec tax (since 1935) and Medicare (1965) And to that we had "all the military" that we needed in 1900"---?? No need to continue debate on this topic
ArrowII writes:
How is that "free health care" coming along?
Magic81 writes:
What are you saying here--?? I know that are incapable of eleoquence, and cannot comprhend the facsts that are given to you--but at least write in sentences that can be understood.
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