Fiscal Cliff “Fix” is a Raw Deal for Taxpayers

January 02, 2013

By James Volvo

The last-minute deal to avert the so-called fiscal cliff suffers from some of  the worst ailments of Washington’s backroom deals.  Primarily, it does not  address the nation’s fiscal imbalance because it allows taxes to go up but fails  to tackle the true driver of our economic woes: runaway government  spending.  Not surprisingly, President Obama has already stated that he  wants to raise taxes again next year too.

The package is being rushed through at the last minute, possibly voiding the  Speaker’s promise that the country would be able to review legislation for three  days before the House voted on it.  Much like the President’s health care  law, it looks like we’ll have to pass the tax bill to find out what’s in it.

Worst of all, the deal allows taxes to rise in a weak economy, something  economists across the ideological spectrum counsel against.  Taxes are  going up across the economy:

Thankfully, low marginal rates for some are being made permanent and the  alternative minimum tax is finally being fixed for good, avoiding the yearly  race to “patch” the income thresholds.  Capital gains and dividend rates  are being held down to a reasonable level and made permanent as well.

Details on “business extenders” remain unclear.  However, reports  indicate that the distortionary wind production tax credit will not only be  extended but expanded so that even more uneconomical, unreliable electricity  will be produced.

In the end, the country’s economic policies will take a turn for the worse as  the calendar flips to 2013.  Taxes will be higher, economic growth will be  burdened and the nation’s budget will still not be fixed.

Mr. Valvo is director of policy at Americans for Prosperity.  You  can follow him on Twitter @JamesValvo.

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