FE Editorial : Scaling the cliff
While purists argue President Obama has given away too much to the Republicans who will continue to bargain more since the debt-ceiling still remains unresolved, the deal is significant since, after many years, the US is actually raising taxes to deal with fiscal problems. The hiking of taxes to Clinton-era rates for families that earn more than $400,000 a year—assuming the Senate passes it tomorrow—is much more generous than what Obama campaigned for. He wanted to apply these rates to family incomes of over $250,000, but keep in mind raising taxes is easier, and makes more sense, when the economy is doing well as it was when Clinton was president. Which is why the White House has claimed it has managed to get 80-85% of what it wanted—the concession to the rich, presumably, was bartered for being allowed to retain other benefits such as on unemployment insurance, tax-credits for low-income families and a reduction in the impact of the alternative minimum tax on middle-class families. Estate duties have been raised from 35% to 40% and dividend tax from 15% to 20%—again, not as high as the Democrats wanted, but higher than the Republicans would have liked to concede. The $600 billion of extra taxes this will generate over a decade means average US taxes will rise between 1-1.25% instead of the 5% that would have taken place had the cliff not been resolved.
While that means a definite slowing of the US growth process,
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