The White House and many members of Congress — Democrats and Republicans alike — are patting themselves on the back this week as they averted the so-called “fiscal cliff.” Only in Washington, DC could making nothing in the way of substantive spending and raising taxes on 77% of American households be considered as some sort of victory.
President Obama claimed that the ”fiscal cliff” deal “protects 98 percent of Americans and 97 percent of small business owners from a middle class tax hike” and that he would “continue to fight every day on behalf of the middle class.”
Of course, this isn’t reality. What the middle class needs are jobs, and the “fiscal cliff” deal, which includes higher taxes on small businesses, is expected to keep the economy from living up to its full potential:
The tax deal is also expected to result in hiring growth at last year’s pace, meaning the creation of 150,000 to 160,000 payroll jobs a month, according to Michael Gapen, senior United States economist and asset allocation strategist at Barclays.
Without the tax increases, employers would probably be adding more than 200,000 jobs a month.
Altogether, that means the economy will “create 600,000 fewer jobs in 2013 — leaving the unemployment rate 0.4 percentage point higher — than it would have if the 2012 tax policies had been kept in place,” said Mark Zandi, chief economist at Moody’s Analytics.
The compromise called for taxes to rise to 39.6% from 35% on personal income above $400,000. In a 2011 study, the Treasury Department found that raising taxes on incomes over $500,000 would affect roughly 750,000 small businesses organized as S-Corps, partnerships and other small entities.
And it’s not just income taxes and the payroll tax holiday expiring, Americans were hit with $1 trillion in new taxes thanks to ObamaCare. If you’re raising taxes on small business owners, the engine of our economy, and it’s clear that these tax hikes will slow job growth; how exactly does this help the middle class? Only in Bizarro World.