Though the fiscal cliff deal passed by Congress late on New Year’s Day will raise a substantial amount of new revenue over the next decade, the resulting revenue levels will still be significantly below what bipartisan experts believe we will need in the medium term and far lower than the last time the budget was balanced. And despite any protestations from antitax advocates, the tax increases in the deal are actually relatively slight compared to other tax hikes of the past.
The American Taxpayer Relief Act of 2012—the fiscal cliff legislation agreed to in a deal between President Obama and Senate Minority Leader Mitch McConnell (R-KY)—will raise approximately $617 billion in higher revenues from 2013 to 2022, compared to what the tax code would have generated if we had simply extended all the Bush tax cuts, which were scheduled to expire at the end of 2012. More than 90 percent of the increase will come from households making at least $1 million a year.
$617 billion is not an insubstantial amount, but given the enormous tax hole we’ve been in for the past decade, as well as our aging population and the projected increases in health care costs, it is far less than we will need for fiscal stability.
For more on this topic, please see:
- Revenue from the Fiscal Cliff Deal in Context by Michael Linden and Michael Ettlinger