Here’s the brief version of the “fiscal cliff” drama: In a staged theater, Congress dodged the first bullet, but the gun is still pointed at their heads.
In practical terms, the Senate passed a bill that keeps the Bush-era tax cuts for the vast majority of Americans while raising tax rates on the top 2 percent (earning $400,000 annually for an individual or $450,000 for a couple) from 35 percent to a high of 39.6 percent. The bill also keeps unemployment benefits for another year to 2 million Americans, and maintains several tax breaks passed under President Obama in 2009 for low-income Americans for the next five years — important measures to keep the nation from sliding back into recession and help low-income Americans improve their future prospects.
The estate tax rate was increased 5 percent, but the exemption was raised to $5 million; a compromise was also reached on capital gains and dividends with rates rising 5 percent for the wealthiest (to 20 percent) but holding steady at 15 percent for those earning under $400,000. Also, the Alternative Minimum Tax will be patched to avoid raising taxes on the middle-class but assuring that the wealthy will pay at least a minimum amount regardless of how many legal loopholes they may find.
The bill also postponed a measure to cut Medicaid support to doctors for a year, extended a full package of business tax breaks for another year, and Sen. Patrick Leahy was successful in attaching a 9-month emergency fix to the farm bill to avoid what was being called the “milk cliff,” in which milk prices might have doubled without the fix.
But little spending was reduced. The dreaded sequester (mandatory cuts to domestic and defense spending) was delayed for two months, which keeps the gun pointed at Congress’s collective cerebrum. The fight now pits Obama’s determination to match future cuts with revenue hikes on a dollar-for-dollar basis against Republicans who want to shrink funding for Social Security, Medicare and Medicaid and a host of other domestic programs while holding defense spending harmless and not raising taxes any further — say on those making $250,000 annually, or more.  Stay tuned.
Angelo S. Lynn