Fiscal Cliff Deal Gets Approved
President Barack Obama and the Republicans in Congress are preparing for the next round of budget battles after reaching an agreement regarding the fiscal cliff that prevented the potentially devastating spending cuts and tax increases. The deal was approved late Tuesday by the Republican-controlled House of Representatives. It was perceived as a victory for President Obama, who pledged during his re-election bid to control the budget by increasing taxes on the rich taxpayers.
But the approval of the deal leads to more rounds of political showdowns over the next couple of months on raising the nation’s limit on borrowing and spending cuts. The Republicans said that the deal did little to control the federal deficit. They pledged to use the debt ceiling debate to get more spending cuts.
Republicans acknowledged that they lost the fiscal cliff battle when they agreed to increase taxes on the wealthy without getting something in return. They promised that the next deal would include larger cuts in government benefit programs like Medicaid and Medicare for retirees and the poor. They say that these were the largest drivers of federal debt.
President Obama wants less drama when the White House and Congress address the next fiscal issues such as the government’s $16 trillion debt. The tax package that Congress passed will protect 99 percent of American taxpayers from tax increase. Most of them will end up paying more federal taxes in 2013.
This is because the measure didn’t do anything to prevent the reduction in the Social Security payroll tax from expiring. In 2012, the 2 percentage point cut in the payroll tax was worth around $1,000 to a worker who earns $50,000 a year.
The Tax Policy Center, which is a nonpartisan Washington research group, estimates that 77 percent of American households will have to pay higher federal taxes in 2013. High income families will feel the largest tax increases.