Daniel J. Mitchell

There’s no official agreement, so everything you read here may turn out to be nonsense, but it appears that the misfits in Washington have reached a deal on the fiscal cliff.

It seems as though my prediction about the outcome was correct. Not that this makes me happy.

First, the good news.

Oh, wait, there isn’t any.

Now for the bad news.

The top tax rate will increase to 39.6 percent for entrepreneurs, investors, small business owners, and other “rich” taxpayers making more than $400,000 ($450,000 for married couples). This is Obama’s big victory. He gets his class-warfare trophy.

The double tax on dividends and capital gains will climb from 15 percent to 20 percent (23.8 percent if you include the Obamacare tax on investment income).

The death tax rate will be boosted from 35 percent to 40 percent (which doesn’t sound like a big step in the wrong direction until you remember it was 0 percent in 2010).

The alternative minimum tax will still exist, though it will be “patched” to protect as many as 30 million households from being swept into this surreal parallel tax system that requires people to use a second method of calculating their taxes – with the government getting the greatest possible amount.

Unemployment benefits will be extended, ensnaring more Americans in joblessness.

Medicare spending will be increased as part of a “doc fix” to increase reimbursement payments for providers.

This is sort of like a late Christmas present, but we must have been naughty all year long and taxpayers are getting lumps of coal.

That being said, I was expecting even worse, so this deal (assuming it happens) almost seems like a relief.


Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.