January 1, 2013
Credit: Paul J. Richards/AFP/Getty Images/Newscom
The Congressional Budget Office (CBO) just now released its score of the bill the Senate passed early this morning while everyone was celebrating the beginning of the New Year. Despite knowing for a long time that taxes would go up on all Americans today, the Senate waited until we technically went over the cliff to act. Washington’s dysfunction was even fodder for New Year’s revelers in Times Square.
Going over the cliff allows Congress to technically say that it isn’t raising taxes, but is cutting them instead. CBO’s score backs them up on this by
scoring the Senate bill as a $3.6 trillion tax cut. No one should fall for this. 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.
There was some good in the Senate bill — the harmful defense sequester cuts were postponed and most tax hikes were avoided. But there was bad — tax hikes that will hurt the economy and do little to tame the deficit, especially factoring in the spending in the bill.
Now the deal that passed the Senate is in the hands of the House of Representatives.
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.