The Democrats compromise on the Fiscal Cliff: You pay more...
...they spend more.
Representative Nancy Pelosi (D-CA) called it “a happy start to a new year.” That probably tells you all you need to know about the fiscal cliff deal that passed the House last night.
The bill—which President Obama has promised to sign, though he took off for Hawaii again after the vote—has a 10 to 1 ratio of tax increases to spending cuts. This is the President’s version of a “balanced” approach.
In addition to tax increases on Americans making more than $250,000 a year, the bipartisan deal will actually raise taxes on the vast majority of American workers. How? The payroll tax “holiday” has ended. The Wall Street Journal calculates that the “typical U.S. family earning $50,000 a year” will lose “an annual income boost of $1,000.”
Meanwhile, the higher tax rates will hit small businesses and investors—which is grim news for a country in need of new jobs.
“It is the small businesses that employ the most workers who will pay the higher rates,” explains Heritage’s Curtis Dubay. “These tax hikes on investment will further dampen investment and result in even less job creation. This is more bad news for the 12 million unemployed Americans.”
While the President touted a “balance” of tax hikes and spending cuts, the truth is that the bill increases government spending by about $330 billion.