According to the Huffington Post, because of the structure of the nearly $900 billion Obama-McConnell tax deal, roughly a third of all workers will actually see their taxes increase next year. How anyone can defend this deal as smart politics for Obama is beyond me. From Ryan Grim:
The tax deal reached between President Obama and congressional Republicans could mean a higher tax bill for roughly one in three workers as a result of the Social Security tax cut Republicans pushed as a replacement for the current Making Work Pay tax credit.
The Making Work Pay credit gives workers up to $400, paid out at 8 percent of income, meaning that anybody making at least $5,000 gets the full amount — and gets as much as anybody else. Its replacement knocks two percentage points off the payroll tax cut, meaning a worker would need to make $20,000 to get a $400 break. Of the nation’s roughly 150 million workers, around 50 million make less than $20,000 and will see at least some increase as a result.
Additionally, roughly a quarter of 20 million state and local workers pay no payroll tax, because they have a separate pension system. Some of those workers with children will benefit from the extension of other tax credits, but overall will have less money in their pocket.
I know most Americans don’t pay attention to the day-to-day political fighting in Washington, but I suspect many voters will have heard that Obama reached a deal with Republicans on a hugely expensive tax cut deal. When roughly a third of voters actually see their taxes go up, even slightly, I imagine they will not be happy with Obama. Once again, Washington will pass a massive piece of legislation, like TARP or health care reform, and they will not see any benefits.
Even if you agree with the general idea behind Obama’s strategy of trading an extension of high-end tax cuts and a reduction in the estate tax for more aid to working people that could stimulate the economy, this execution is horrible.
With the government throwing concerns about the deficit out the window for this deal, there is no reason Obama couldn’t have demanded it be structured to at least prevent taxes from going up on any working class person. After all, that “taxes shouldn’t go up on anyone during a recession” was the principle Republicans claimed to be defending when they held the debate “hostage” for the upper income tax cuts.