President Obama has left out certain important aspects of the fiscal cliff deal, in a video broadcast on the Web. This could give a wrong impression of the deal’s impact on the deficit and taxpayers –
President Obama seems to be boasting that families coming under the middle-class category will not be paying more than $2000 extra as taxes during the year. This is correct for taxes on income; however, the President fails to mention, that there is allowance in the deal for the cut on payroll taxes to expire. More taxes will be paid this year by 77% taxpayers, which is almost $1200 extra by those who earn $75,000 to $100,000, and this income range falls into the middle class, as defined by Obama.
President Obama says the deal is going to reduce the deficit. However, there is going to be an increase in deficit by around $4 trillion during the next decade, as there are extensions to the tax cuts provided by the Bush administration, which comprises of one percent top taxpayers. There will be a “deficit reduction” by the deal, only in comparison to a situation, if the Bush cut on taxes were extended to everybody.
All the talk by President Obama of preserving tax cuts for the middle class in the deal to prevent the fiscal cliff seems to create the impression of people paying same amount in taxes for the year, except people who are wealthy. However, that is quite incorrect. Obama has left out in his analysis that temporary reduction of couple years payroll taxes of Social Security has been permitted to expire. This will result in many people paying more taxes in the year.