For weeks now the politicians and major news companies have been going on and on about this stupid term they made up called the “fiscal cliff.” This is where the politicians threaten ordinary people with another massive economic disaster if Congress doesn’t pass a new federal budget that reduces the deficit. And so far this year, the budget voted on looks a lot like the previous budgets – with huge handouts to corporations and the super rich and massive cuts for workers and their families.
The new bill brings the tax rate for wealthy households back to what it was under President Clinton, which for his time was the lowest on record. So now for those wealthy individuals making more than $450,000 a year – the richest people in the whole country – their tax rate increased from 35 percent to 39.6 percent. That’s right – a tiny little 4.6 percent increase.
This is a group of people whose wealth has been increasing every year. For example, in 2012 the top 100 billionaires in the U.S. saw their wealth increase by $241 billion. This tiny tax increase will at best generate $60 billion dollars more per year – not even enough to cover the money wasted on one year of war on the people of Afghanistan.
The bill also made permanent other tax breaks. For the super rich, most of their wealth doesn’t come from their income from wages but from money made on investments in the stock market, corporations, real estate, and others. These will be permanently taxed at the low rate of 20 percent. So, even though the super rich might have to pay a little more income tax, most of their money will be taxed at a rate less than what most workers have to pay. And with their expensive tax lawyers, they’ll likely figure out all the tricks to avoid paying the tiny increase anyway. The most common one will be setting their salary just below the $450,000 mark, avoiding the tax increase altogether, and making the rest of their income in other ways that are taxed at the lowest rate possible, if at all.
But all of these tiny tax increases are just a distraction when compared the 205 billion dollars in tax breaks corporations have received. This includes some of the largest banks, energy companies, companies with off-shore accounts and a lot of foreign investment. There was a steady stream of CEOs from some of the biggest U.S. banks and corporations coming in and out of the White House during the final weeks before passing this new tax deal – and in the end they clearly got what they wanted.
And what’s worse, and has been hardly mentioned at all, is the two percent tax increase that has been imposed on workers. The amount of tax workers pay for Social Security will rise from 4.2 percent to 6.2 percent on all income below $113,700 a year. So for a working family that brings in, let’s say, $50,000 a year, with this two percent pay cut, they’ll take home $1,000 less per year. And as all workers know, getting another pay cut is going be a nightmare since we’re already broke enough as it is.
But that’s not all. One of the main reasons politicians gave for making these changes to taxes was to reduce the federal budget deficit. But when all the tax changes are accounted for – including the cuts for corporations – according to the Congressional Budget Office, the deficit will actually increase by $4 trillion.
So now, the next round of budget talks are beginning and the discussion is about how to cut spending to reduce the deficit. At the top of the list for Democrats and Republicans is slashing Social Security, Medicare, Medicaid, health care, retirement benefits, and raising the retirement age.
So in reality, this fiscal cliff was nothing more than another fiscal scam – to make workers pay more to get less in return as corporations and the super rich get even wealthier. There is a cliff all right – and we’ve been thrown right off of it.
