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Who Won in the Fiscal Cliff Deal?

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Who won in the fiscal cliff deal? The lawyers won.

Well, not just the lawyers. The lawyers, the doctors, the dentists, the middle managers, the advertising executives, the whole MBA crowd.

Who won in the fiscal cliff deal were all those individuals making between $113,700 and $400,000 per year. For couples the numbers will be slightly higher, but still in the lower six figures. They're the ones who will pay the least in new taxes.

The headline outcome of the fiscal cliff deal was that taxes will go up only on individuals who make more than $400,000 per year (and couples that make more than $450,000). For those top earners the marginal tax rate on that part of their incomes that is over $400,000 ($450,000 for couples) will revert to the 1990s level of 39.6%.

For the past decade it's been just 35%.

But a fuller analysis of the fiscal cliff deal reveals that Social Security taxes are going up for all workers on their first $113,700 of income. For the vast majority of workers, this is all of their income. For most American workers, the FICA Social Security tax they pay will rise from 4.2% to 6.2%.

The sweet spot of the fiscal cliff deal is the lower six figure income range. People with incomes in this range don't usually think of themselves as rich. In fact, politicians consistently pander to them, since these are the vocal, educated, politically-engaged professionals who can make or break their careers.

Nonetheless, these six figure professionals are in the top 20% of America's income distribution. They're not rich, but they're comfortable. They're not the people who need a tax break. They're the people who want a tax break.

The fiscal cliff deal is not a bad deal. But it's not a progressive deal. It's a deal for the comfortable, not a deal for the struggling and the poor. Those of us with good jobs and advanced degrees can be satisfied. For the 80% of Americans who don't, it's just more bad news.

 

http://salvatorebabones.com

Salvatore Babones is a senior lecturer in sociology and social policy at the University of Sydney in Australia and an associate fellow at the Institute for Policy Studies (IPS) in Washington, DC.

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Who won in the fiscal cliff deal? The lawyers, the... by Salvatore Babones on Tuesday, Jan 1, 2013 at 11:27:34 PM