By Paul Gable
You have to give Congress credit, the television spot, sound bite and photo op drama was high as the fiscal cliff was “avoided” in New Years Eve and New Years Day votes in the U.S. Senate and House.
Automatic tax hikes and spending cuts that were set to begin yesterday were avoided, but the health of the U.S. economy remains perilous.
What really happened was business as usual on Capitol Hill. By extending the Bush era tax cuts to everyone earning less than $450,000 per year, middle and lower class workers will pay less in income taxes. But approximately 96 percent of millionaires will also be paying less income tax than they would have paid if no deal was passed and Clinton era tax rates were restored.
While 99 percent of U.S. workers will not have an increase in their income taxes, most will go back to paying 6.25 percent in payroll taxes for social security. That rate restores the two percent that was cut from payroll taxes several years ago as part of the stimulus package and will have a direct effect on workers earning less than $100,000 per year.
The current tax rates on estate taxes and the alternative minimum tax were extended.
Draconian government spending cuts were kicked down the calendar two months until we get the next high drama from Washington when the federal government again will hit its debt ceiling.
Among other provisions in the deal passed by Congress, special interest goodies were included as is always the case.
For example, NASCAR and the Hollywood movie industry will benefit from extended depreciation models that benefit them.
Beneficial tax provisions for “Indian coal facilities”, whatever those may be, were extended as was the “Indian tax credit” for businesses that hire individuals who are members of a Native American tribe, work on the tribal land, and live on or near the reservation.
Tax credits for research and development and low income housing were extended as well as accelerated depreciation for restaurants and certain leasers.
A disaster relief bill for those affected by Hurricane Sandy was not voted on in the House.
Most government workers got a pay raise including Congress whose base pay will now be $174,900 per year.
Where else can you earn so much for doing so little?