That’s $15 billion in spending cuts and $610 Billion in tax increases. But it is really no spending cuts and just tax increases. Tax increases always take effect right away and spending cuts are mere promises to be performed in a future that never comes.
Tax Prof has the rundown on the bill’s provisions:
- Raise the marginal tax rate to 39.6% on income over $450,000 (joint) and $400,000 (single).
- Raise the tax rate on dividends and long term capital gains to 20% on taxpayers with income over $450,000 (joint) and $400,000 (single). The top rate would remain 15% for taxpayers with lower incomes.
- Estate tax (death tax) and gift tax: $5 million exemption (inflation-adjusted) and 40% rate.
- Permanent and retroactive patch for the AMT.
- Return of the exemption and itemized deduction phase-outs on taxpayers with income over $300,000 (joint) and $250,000 (single).
- One-year extension of 50% bonus depreciation.
- Extension of various tax extenders.
Further reading and commentary, again courtesy of Tax Prof’s yeoman efforts:
- Breitbart, Fiscal Cliff Deal: $1 in Spending Cuts for Every $41 in Tax Increases
- Greg Mankiw (Harvard), President Rejects His Bipartisan Bowles-Simpson Commission
- Greg Mankiw (Harvard), The Neverending Quest for a More Redistributionist Tax System
- New York Times, The McConnell-Biden Plan
- New York Times, Senate Passes Legislation to Allow Taxes on Affluent to Rise
- Dan Shaviro (NYU), The Fiscal Cliff Deal
- Tax Update Blog, New Year’s Day Special: Senate Passes Fiscal Cliff Bill in Wee Hours
- Wall Street Journal, Details of Tax Law Changes Spelled Out
- Wall Street Journal, Fiscal-Cliff Focus Moves to House
- Washington Post, Everything You Need to Know About the Fiscal Cliff Deal
I’m not sure whether the $5 million exemption from estate (death) taxes constitutes a fresh start or whether pre-2013 lifetime transfers will have to be taken into account. Probably the latter but it would be a huge benefit to family businesses and Western ranchers if it were the former. I’m also not sure where estate (death) tax and gift tax have been unified, as they were for years until Congress de-coupled them in 2003, or if they remain de-coupled.
Forcing families to sell a family business when the patriarch dies is a cardinal sin that no respectable government would ever commit, and allowing Western ranches that might have existed for a century or more to remain in the family is also something no decent government should ever want to break up. The 40% tax rate is still an outrage because neither a death tax nor a gift tax would even exist in a country with a civilized government, a government that cared about the sanctity of earned income and property that had already been taxed as it was earned.