Fiscal Cliff: New Chapter, Same Story
On Sunday, Speaker of the House John Boehner (R-Ohio) concluded a long and tenuous chapter in the fiscal cliff discussions. Deciding to leave ideological trench warfare behind, Boehner has agreed to accept tax increases on the wealthy and a higher total revenue target as components of a solution to the fiscal cliff. Now it is up to the other side of the aisle to leave their fox holes and approach no man’s land.
The current top tax rate of 35 percent, established through the Bush tax cuts, is set to expire on January 1 as part of the fiscal cliff trigger. Previously, Republicans insisted that the Bush tax cuts remain in effect for everybody, where Democrats wanted to keep the tax cuts only for those who made less than $250,000 per year. This means a tax hike on those making more than $250,000 annually, with the rate moving from 35 percent to 39.6 percent, where it was under the Clinton administration.
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Boehner’s new proposal concedes to the Democratic initiative, keeping tax rates low for the vast majority of Americans while increasing the rate for the country’s top earners. However, his proposed cut-off point is $1 million instead of $250,000. The figure could be seen as a starting point that Democrats will try to negotiate down, but given the magnitude of the concession already it’s unlikely that this number will change very much…