U.S. Congress: smaller paychecks for workers

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VOL. 31, NO. 1, JANUARY 2013 WWW.SOCIALISTACTION.ORG U.S. / CANADA $1 New Year’s Day has come and gone; the impending “fiscal cliff” disaster that so occupied the fears of po­ liticos and businessmen throughout the country has, at the 11th hour, been averted by heroic deal-making by Republican and Democratic legislators. They made some “tough decisions” in the face of the (manufac­ tured) crisis that was facing the country. And they passed a bill that managed to both not solve any of the debt problems that led to the mess in the first place (in fact, the deal will increase the budget deficit) and to set the stage for further assaults on social programs and working people in general in the very near future.

The deal, known as the American Taxpayer Relief Act of 2012, is obviously focused mostly on the tax rev­ enue side of the budget equation. It has a number of provisions, of which the most important are:

Permanency of the Bush Tax Cuts: The income tax cuts signed into law by President Bush in 2001 were one of the three major factors (the other two being the recession and the expansion of health-care costs) leading to the explosion of U.S. public debt that caused this entire mess in the first place. The bill made these tax cuts permanent for everyone except those earning over $400,000 a year, or only about 1% of taxpayers.

The Congressional Budget Office (CBO) projects that, as a result, the budget deficit will increase by $4 tril­ lion over the next 10 years, relative to the case where all of the Bush tax cuts had expired this year, as origi­ nally scheduled. That shortfall means—you guessed it—another fight down the line over which social pro­ grams should be cut (and those cuts will be deep). The estate tax was also raised to its Clinton-era levels.

The Expiration of the Payroll Tax Cut: A payrolltax holiday was enacted in 2010 as part of a fiscal stimulus program to assist recovery from the re­ cession, dropping the rate to 4.2% from 6.2%. That means that anybody earning a paycheck will, despite the rhetoric about “not raising taxes on middle-class families,” see an increase of an average of a thousand dollars on their tax bill this year. And, since the pay­ Tony Savino / Socialist Action roll tax is a flat tax capped at $106,800, the increase disproportionately affects those workers earning the least; someone earning $500,000,000 a year pays the same amount of payroll tax, $2,274, as someone earning $150,000. And, of course, a two percent tax increase will hurt a family living on $30,000 a year a lot more than one earning $150,000.

Taken along with the Bush tax cuts being made per­ manent, we can begin to see an outline of the benefi­ ciaries of tax policy in the United States. What we have is a major tax increase on all working people, while those earning higher incomes see no increase in their income tax, and a slight increase in payroll tax (which does not rise proportionally to income because of the cap).

There is, of course, a minor bone thrown in, in the form of a marginal tax increase on small numbers of the very rich, but this does nothing to impact the debt or improve the lives of working people. And al­ though the payroll tax funds Social Security, there is (continued on page 4, in “Syrian rebels gain ground; U.S. threatens intervention”)

See page 12 .

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