Our friends at Citizen for Tax Justice have come out with a new report that explains how the fiscal cliff deal did not raise enough revenue:
Tax changes that took effect in 2013, allowing parts of the Bush-era cuts in the federal personal income tax to expire and an increase in the Medicare Hospital Insurance (HI) tax, did make the rich pay higher taxes than they had in earlier years. But the fiscal cliff deal also did not extend a temporary payroll tax break, which had particularly helped low- and middle-income working people in 2011 and 2012.
Even though taxes were raised for the highest earners, the effective tax rates of the wealthy have only changed marginally. For example, the top 1% of earners were paying an effective tax rate of 30.1% under 2012 law, while under the fiscal cliff deal there tax rate would rise to 33%. The next 4% of Americans also saw small rate increases, from 31.3% to the current 32.2%.
The Fiscal Cliff deal was more progressive than what we had in place, but we still have a lot more work to do to achieve tax fairness.
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