Some great commentary from Bill McBride today at Calculated Risk, first about the election:
A personal note: I’d like to thank Governor Romney for his personal sacrifice. I believe he is a decent man, and I think everyone should appreciate the sacrifice all candidates made in running for office (I’d never do it, even at the local level). I also think President Obama is a decent man, and I remain optimistic about the future.
And about the fiscal “cliff”, which is not really cliff and which does not have a hard deadline of January 1:
1) The top marginal tax rate will increase from 35% to 39.6%. The details still need to be worked out (at what income the highest bracket will start, and what happens with dividends and capital gains). The it is pretty clear the top tax rate will increase.
2) The payroll tax cut is probably going away. This was the 2% payroll tax reduction that workers received in 2010 and 2011. For a family with a $50,000 per year income, this is a tax increase of about $20 per week.
3) The Alternative Minimum Tax (AMT) relief will probably be extended (it is every year).
4) Given that the top marginal tax rate will increase – and that certain politicians can’t vote for any bill with a tax increase – the agreement will probably be voted on in January after the Bush tax cuts expire.
Here’s CR’s graph of the history of the top marginal tax rate:
An increase in the top tax rate is just one small move that could help address the deficit and debt. There’s essentially no historical correlation that suggests that a slight increase in that rate will damage the economy.