Fiscal cliff deal recap: Payroll tax hitting everyone - KMSP-TV

Fiscal cliff deal recap: Payroll tax hitting everyone

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  • Fiscal cliff deal recap: Payroll tax hitting everyoneMore>>

  • 2 Minn. Reps. break rank on fiscal cliff vote

    2 Minn. Reps. break rank on fiscal cliff vote

    Wednesday, January 2 2013 3:58 PM EST2013-01-02 20:58:27 GMT
    With the exception of two representatives, Minnesota's congressional delegation voted down party lines on the bill to avoid the "fiscal cliff" of tax hikes and spending cuts.
    With the exception of two representatives, Minnesota's congressional delegation voted down party lines on the bill to avoid the "fiscal cliff" of tax hikes and spending cuts.
  • Cliff avoided: Congress staves off tax hikes

    Cliff avoided: Congress staves off tax hikes

    Tuesday, January 1 2013 11:46 PM EST2013-01-02 04:46:58 GMT
    Flickr/Creative Commons/Kevin BurkettFlickr/Creative Commons/Kevin Burkett
    Past its own New Year's deadline, a weary Congress sent President Barack Obama legislation to avoid a national "fiscal cliff" of middle class tax increases and spending cuts late Tuesday night.
    Past its own New Year's deadline, a weary Congress sent President Barack Obama legislation to avoid a national "fiscal cliff" of middle class tax increases and spending cuts late Tuesday night.
WASHINGTON (KMSP) -

Washington D.C. is a virtual ghost town Wednesday morning with Congress adjourning and the president back on vacation in Hawaii. Everybody left because the House approved the Senate's fiscal cliff deal to prevent big tax increases and automatic spending cuts.

This deal provides everybody on Capitol Hill cover because neither side wanted the blame for possibly plunging the American economy back into recession. What the deal doesn't do is address the nation's growing debt -- something polls show worries a lot of voters.

"I am very open to compromise. I agree with Democrats and Republicans that the aging population and the rising cost of healthcare makes Medicare the biggest contributor to our deficit," President Obama said. "I believe we've got to find ways to reform that program without hurting seniors who count on it to survive. And I believe that there's further unnecessary spending in government that we can eliminate. But we can't simply cut our way to prosperity."

The president acknowledged, after the bill passed the House 257 to 167, that bigger battles and issues loom as the new Congress gets to work in a matter of days -- issues like the $16 trillion debt and unsustainable growth in entitlement programs.

But there's certainly relief among many that 98 percent of Americans who make less than $400,000 a year won't see their income tax rates rise back to Clinton-era levels. And there won't be $109 billion in cuts to the Pentagon or other programs.

Reaction on Capitol Hill is mixed, even within the two parties.

"The problem is we set up three more fiscal cliffs," said Rep. Jim Moran (D-Virginia). "We're going to have to deal with the debt ceiling, were going to have to deal with the continuing resolution expiration and were going to have to deal with the sequester and all that's left is spending cuts."

"This legislation is far from perfect, and the process that has led us here is an utter disgrace," said Rep. Louise Slaughter (D-New York). "Yet in this time of crisis we must act first and foremost to try to protect the American economy, and today's legislation will to that."

Neither side wanted to talk about the tax hike that will hit just about everybody at the start of 2013. The "payroll tax holiday," which allowed you to keep two-percent more of your take-home pay for the past two years, expired with the new deal and will go back into Social Security.

For example, if you make between $20,000 and $30,000, you'll pay about $300 more. For those earning $50,000 to $75,000, it's an $822 increase. At the $100,000 level, the jump is $1,784, and it's nearly $3,000 for families earning $200,000 up to $500,000.

Those numbers worry many economists, who say that could really hurt the fragile recovery because that money will be taken out of the economy. The president says he'll sign the bill, although it's not clear when he'll do it. He can use what's called an "auto-pen," or the actual bill can be flown to Hawaii where he and his family will be vacationing until this weekend.

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