Congress cut a deal in the early hours of the New Year that narrowly steered clear of the “fiscal cliff” that would have triggered automatic federal spending cuts and tax cuts in 2013.
In concessions by both sides in the long-running congressional debate over budget deficit control, a deal was forged that will mean taxpayers will see less tax hikes than Democrats wanted but more than Republicans sought while leaving unresolved the dimensions of spending cuts and the federal debt limit.
“A central promise of my campaign for President was to change the tax code that was too skewed towards the wealthy at the expense of working middle-class Americans,” said President Obama, in a statement.
“Last year I signed into law $1.7 trillion in deficit reduction,” said Obama, about the deal that also “further reduces the deficit by raising $620 billion in revenue from the wealthiest households in America.”
“There will be more deficit reduction as Congress decides what to do about the automatic spending cuts that we have now delayed for two months.”
According to a fact sheet released by the White House, the deal will continue emergency unemployment insurance (UI) funds for roughly 2 million Americans. Initiatives to offset rising college tuition costs will also stay in place through the American Opportunity Tax Credit. And the 27 percent cut in reimbursement funds for doctors caring for Medicare beneficiaries was avoided.
Though members of the middle class were saved from the $2,000 income tax increase the White House expected at the end of the Bush-era tax cuts, payroll taxes, such as funds deducted for social security, will still nip at their actual take-home pay.
According to the Tax Policy Center, taxpayers making less than $10,000 a year will pay $68 more in federal taxes, on average, while those making between $50,000 and $75,000 will see a $822 jump. Wealthy filers with incomes of $1 million or more will see a $170,341 spike, on average.
“The federal government has a spending problem that has led to a $16 trillion national debt that threatens our country’s future,” said House Speaker John Boehner (R-Ohio), in a statement responding to the last-minute agreement. “Now the focus turns to spending.”
“Without meaningful reform on entitlements, real spending controls, and a fairer, cleaner tax code, our debt will continue to grow, and our economy will continue to stumble.”
But the president is standing firm on his approach to the nation’s fiscal dilemma.
“While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they’ve already racked up through the laws that they passed,” said Obama, in a stern warning to the legislators continuing to threaten the economic progress made since the recession.
“Let me repeat: We can't not pay bills that we've already incurred,” he said. “If Congress refuses to give the United States government the ability to pay these bills on time, the consequences for the entire global economy would be catastrophic — far worse than the impact of a fiscal cliff.”