Taxes under the debt deal are going up.
Monday, August 1, 2011 at 4:39PM According to a post by Scott A. Hodge at the Tax Foundation, taxes for virtually every working American will go up on January 1, 2013 under the debt deal.
How you ask? The deal assumes that all Bush-era tax laws will expire at the end of 2012. That expiration will increase tax revenues by $3.5 trillion (i.e. 10%) over ten years than would otherwise be collected under an extension of current policies. From the post:
They can do so by assuming what is known as the "current law" baseline that assumes that all of the Bush-era tax laws expire as scheduled at the stroke of midnight on December 31st 2012. This means that all income tax rates will go up across the board, the child credit will fall from $1,000 to $500, the marriage penalty will return. Moreover, the current law baseline also assumes that the AMT will not be "patched" and will affect tens of millions of unsuspecting taxpayers. Under this baseline scenario the federal government is estimated to collect $39 trillion in tax revenues over the next ten years. So by assuming taxes have already gone up lawmakers can say that they have not "technically" increased taxes.
Call it what you will, but Americans would still pay more in taxes than they would if all of the tax policies that are currently in place were simply extended for the next ten years. As the chart below shows, if all of the Bush-era tax laws were extended, along with the AMT patch, this "current policy" baseline would still be expected to raise roughly $35.5 trillion in revenues over the next ten years.
Thus, the budget deal's current law baseline assumes $3.5 trillion more in tax revenues over ten years than what would otherwise be collected under current policies. That's a 10 percent tax increase over current policies.
By contrast, federal spending is expected to total nearly $46 trillion over the next ten years. Under the most optimistic scenario, the compromise plan would "cut" $2.4 trillion in spending, which would amount to an overall spending cut of 5.2 percent. Of course, this assumes that none of the spending cuts are gimmicks - which considering the games they have already played with the revenue baseline, is a pretty big if.