Econintersect: In the fading hours of New Year’s Day evening, the U.S. House of Representatives passed the bill approved in the wee hours of the morning of the same day by an 89-8 vote in the U.S. Senate. Only after the Senate insisted that the House must take an up-or-down vote did House Speaker John Boehner bring the bill up for a vote at 10 pm. The final tally in the House, although closer than the Senate, was a substantial 90 vote margin, 257-167. More than 90% of the Democratic votes (172) were joined by more than a third of the Republicans (85) to produce the winning margin.
Most of the Republican opposition centered on the delay of two months for resolution of the spending side of the fiscal cliff. The legislation puts off for two more months the resolution of e most of the automatic spending cuts that had originally been set to take effect on January 1.
The opposition to the bill was led by Eric Cantor, the second ranking Republican in the House. This immediately raise the question of whether Cantor will enter the fray to challenge the re-election of Boehner as Speaker.
If the House leadership had followed the practice of the current session now ending, the bill would not have been brought up for a vote. The practice has been not to bring to the floor any bill that would not be able to pass with only Republican votes. That clearly was not the case with the fiscal cliff deal passed.
A major tax change brought by the bill now awaiting President Obama’s signature is the end of the 2% FICA tax reduction that has been in effect for the past two years. Workers now will see 2% less in their paychecks. For a $400 a week near minimum wage worker that will be $8 a week less going into the economy. According to an article in the Financial Times, 77% of U.S. workers will a tax increase, primarily from the higher FICA. Only 0.7% will see higher personal income taxes. The FT was quoting numbers from the Tax Policy Center.
The Congressional Budget Office (CBO) has published an accounting of the bill (reference link in Sources). That analysis indicates that federal revenues will be decreased by $1.4 trillion 2013-2017 compared to the full fiscal cliff tax increase. The 10-year revenue loss is estimated to be $3.6 trillion. The CBO did not estimate the the changes vs. the full extension of all 2012 taxes.
The Tax Policy Center has estimated that the full fiscal cliff would have increased federal tax revenues by $500 billion in 2013.
The CBO estimates for the new law are for a decrease in federal tax revenue (vs. going off the cliff) of -$280 billion. The difference calculated by Econintersect is an increase in federal tax revenue in 2013 of $220 billion compared to having continued 2012 tax provisions.
Econintersect has not located five and ten year estimates of the change for federal tax revenues with the fiscal cliff deal bill compared to 2012 tax law.
See previous articles about the fiscal cliff deal at GEI News for more details about the tax changes.
Sources:
- House Passes ‘Fiscal Cliff’ Bill; Now to President (C-Span, 01 January 2013)
- US Congress passes fiscal cliff deal (Richard McGregor, Financial Times, 02 January 2013)
- Estimate of the Budgetary Effects of H.R. 8, the American Taxpayer Relief Act of 2012, as passed by the Senate on January 1, 2013 (Congressional Budget Office)
- Toppling Off the Fiscal Cliff: Whose Taxes Rise and How Much? (Roberton Williams, Eric Toder, Donald Marron, Hang Nguyen, Tax Policy Center, 01 October 2012)
