This is because President Obama and the Democrats did not fight to stop the increase in payroll taxes that is levied on wages and salaries below $113,700. Most lower income workers pay more in payroll taxes than income taxes, and will see their take-home pay fall by more than 2% this year. This is an increase in a regressive tax, that is, one that falls more heavily on low and middle income workers, since the payroll tax does not cover interest, dividends and capital gains that mainly go to the rich.

While the compromise did continue federal extended unemployment insurance (called the Emergency Unemployment Compensation or EUC) for jobless workers who continue to look for work for more than six months, and extended the Earned Income Tax Credit (EITC), the child tax credit, and education tax credit, which mainly help the working class, these extensions were all temporary.

In contrast, higher income households and the rich got permanent extension of the Bush tax cuts for individuals making up to $400,000 ($450,000 for couples), a permanent inflation fix for the Alternative Minimum Tax (or AMT), which mainly helps households between $200,000 and $500,000 in income and a permanent increase in the lower limit for estate taxes to $5 million in wealth.

In addition to cutting the income of working class households, the increase in the payroll taxes will also chop more than half a percentage point from economic growth, according to mainstream economists. With economic growth over the last year at a moderate rate of 2.6%, this will mean slower growth and higher unemployment (which is still at 7.7% nationally and much higher in many areas) this coming year. In comparison, the tax increases on the rich are only projected to slow the economy by 0.15%, or about a quarter as much.

Last, it is now a fact that there never was a ‘fiscal cliff,’ since the country went past the deadline and the economy did not collapse. In fact the stock market, which usually rewards companies for laying off thousands of workers, applauded the compromise, with the Dow Jones rising more than 300 points after hearing news that the House passed the Senate compromise bill. The whole idea of calling the tax increases and spending cuts a “cliff” was designed to scare working people into accepting more taxes on themselves and even accept cuts to Social Security and Medicare.

#UnitedStates #fiscalCliff

San José, CA – Early New Year’s Day, the U.S. Senate voted 89-8 to pass a compromise bill to put off the so-called ‘fiscal cliff.’ The bill now goes to the House of Representatives, where Republicans are likely to try to get even more tax breaks for the rich.

One of the few good parts to the bill is that it will continue the federal unemployment insurance for the long-term jobless for another year. There are about 2 million workers collecting benefits under the Emergency Unemployment Compensation (EUC) program. All of them would be immediately cut off this week if a bill extending the benefits is not signed into law.

Other benefits of the compromise for poor and working people are an extension of the Earned Income Tax Credit (EITC), a child tax credit and credits for college tuition. These credits were expanded or started in 2009 in response to the economic crisis and will continue for five years.

On the other hand, working people face an immediate tax hike because the payroll tax cut will expire. Most workers getting a paycheck will see their FICA payroll taxes (which go to pay for Social Security) rise by 2%, from 4.2% to 6.2%. This will affect 160 million working people, raising their taxes by about $125 billion in the coming year. This tax increase will have less effect on the rich, as the FICA is only collected from paychecks and not from investment income, and only on the first $113,700 earned.

The compromise also locks in the Bush-era income tax cuts for everyone earning less than $400,000 ($450,000 for a household). The Bush cut in taxes on interest, dividends and capital gains will also continue for these individuals and households. There is a permanent ‘fix’ for the Alternative Minimum Tax, which mainly benefits households earning $200,000 to $500,000 a year. A cut in Medicare reimbursement rates for doctors is delayed a year. The lower limit on taxing estates goes from $1 million before the Bush tax cuts to $5 million under the compromise. A number of business tax credits were also extended.

In addition, the compromise puts off the automatic, across the board spending cuts designed to reduce the federal government’s budget deficit by two months. However, the compromise does nothing about raising the federal government’s debt limit, which will force massive cuts in spending in about two months if nothing is done.

#SanJoséCA #Unemployment #crisisOfCapitalism #taxCuts #ExtendedUnemploymentCompensation #fiscalCliff

Tallahassee, FL – The afternoon clouds were dark, but even the threat of rain couldn't stop students, retirees, and union members from taking a stand against federal budget cuts. About 35 people rallied outside of Republican Congressman Steve Southerland’s office here, Dec.10, demanding no cuts to Medicare, Medicaid, or Social Security.

The protest was part of a national day of action called by the AFL-CIO and other trade unions in response to the so-called ‘fiscal cliff.’ If Congress does not act by Jan.1, 2013, they will trigger a set of austerity measures, budget cuts and tax increases.

Carrying signs that read, “Don’t cut my Medicare benefits,” and “No more tax cuts for the rich,” protesters listened to a short stack of speakers in the parking lot below Southerland’s office.

Republican lawmakers, like Southerland, have pushed for deep cuts to programs that support workers and retirees, like Medicare and Medicaid. President Barack Obama and the Democratic Senate have proposed a compromise that includes meager tax hikes for the richest 2%, coupled with cuts to Social Security and Medicare in the form of increasing the eligibility age.

Michael Sampson, a student at Florida State University, fired up the crowd with a passionate speech explaining how budget cuts by politicians benefit the rich at the expense of working people. He said, “We see the politicians of the 1% trying to balance the budget on the backs of the hardworking people who built this country. And it is a shame!”

The crowd erupted into cheers and chanted, “When Medicare is under attack, what do we do? Stand up! Fight back!”

Next, protesters heard from David Jacobsen, the President of the Northwest Florida AFSCME Retiree Council, which represents more than 600 retired workers.

“We want legislators to keep their hands off these programs,” said Jacobsen. Speaking to Republican proposals that would force working class retirees to pay crippling bills, he added, “Medicare should never, ever, ever be a voucher program. It should be available to young people the same way it is available to me now.”

After Jacobsen’s speech, the protesters marched upstairs to Southerland’s office chanting, “They say cut back, we say fight back!” The crowd packed inside the small office and asked Southerland’s staff to pass on their demands to the congressperson.

Taking video using an office cell phone, the staff recorded a message of retirees and students speaking out. The footage was sent directly to Southerland’s phone via text. The protesters then reconvened outside briefly to discuss future actions.

For more in depth analyses of the ‘fiscal cliff’ see: http://www.fightbacknews.org/2012/9/25/federal-government-course-austerity-2013

#TallahasseeFL #PoorPeoplesMovements #BudgetCuts #crisisOfCapitalism #SocialSecurity #Medicare #fiscalCliff #CongressmanSteveSoutherland

The federal government is on course for large spending cuts and tax increases starting January of 2013. This comes from a combination of three things: the end of some of the Obama administration stimulus that began in 2009; the end of large tax cuts, especially for the wealthy, done under the Bush administration; and automatic spending cuts designed to reduce the federal budget deficit. While some of the tax increases would not fully take effect until April 2014, and others could be reversed, the right wing is using fears of a ‘fiscal cliff’ to try to extend tax cuts for the rich and block planned cutbacks in military spending.

The largest immediate impact will be felt by jobless workers, as the federal Emergency Unemployment Compensation (EUC) program will close down in January unless Congress extends funding. The EUC provides an additional year of Unemployment Insurance (UI) benefits after the state UI is used up at the end of six months. There are now about 2.5 million unemployed people collecting EUC who will lose their benefits if Congress doesn’t act. The other federal UI program, Extended Benefits (EB), has already been shut down in a compromise with the Republicans, dropping 500,000 jobless workers from Unemployment Insurance.

The other group facing an immediate impact is low and middle-income workers, who will see their Social Security payroll tax rate rise from 4.2% to 6.2% when the 2% tax cut ends in January. This tax cut began with the American Recovery and Reinvestment Act (ARRA) (the Obama administration stimulus program that started in February 2009). There will be an immediate increase in the FICA withholding from workers’ paychecks in January 2013, reducing workers’ take home pay by 2%. FICA is the payroll tax that pays for Social Security and Medicare.

The impact of the end of the Bush-era tax cuts will take a longer period of time. The end of income tax cuts will depend on when the IRS issues new withholding rules. The higher taxes would be refunded in 2013 when people file their income taxes if some or all of the tax cuts are extended. In contrast, there is no mechanism and almost no chance that unemployed workers or low and middle-income workers will see any retroactive benefits or refunded payroll taxes if these programs are extended after the beginning of the year.

The end of other Bush tax cuts for stock dividends and reductions in the estate tax would be felt later since these taxes are not withheld. The Alternative Minimum Tax (AMT) would also cover more high-income (but not rich) households earning $200,000 to $500,000 per year, but this would not kick in until they file their 2013 tax returns in 2014. In fact, the AMT has been regularly cut back mid-year in previous years.

In addition to these planned tax increases, the failure of Congress to come up with spending cuts means that automatic cuts will start in 2013; half coming from the military, and the other half coming from other spending (except for Social Security, Medicare, and Medicaid). Cuts in domestic spending such as education and food stamps will be felt faster, while the military cuts will take longer.

The media and the right-wing have been calling these tax increases and budget cuts a ‘fiscal cliff’ to scare people into supporting extension of tax cuts for the rich and restoring spending on the military. While it is true that if all the spending cuts and tax increases continue for a number of months that the economy will fall back into a recession, there is no ‘cliff’ that the economy will fall off in January.

The only cliff will be for the millions of unemployed collecting federal Extended Unemployment Insurance benefits who will be cut off unless the EUC program is renewed. For working people and their allies, this is the most immediate fight: to renew and expand federal Unemployment Insurance benefits. There are more than 5 million people who have been out of work for more than six months, making up more than 40% of all unemployed workers. Half of these jobless workers are not collecting unemployment insurance benefits already. This group would be the hardest hit but is getting the least attention by the mainstream media.

Another fight for us to wage is to renew the payroll tax cut that mainly goes to low and middle income workers. Even better would be to return to the original Obama stimulus tax cut, which would also benefit the teachers and some other government workers who are not covered by Social Security and the self-employed who also pay Social Security taxes but not FICA.

An additional battle we have is the effort to extend the tax cuts for low and middle-income households, while letting the Bush tax cuts expire for higher incomes, dividends and the estate tax. Over the last 30 years, the rich have gotten richer and the poor poorer and more and more workers are just surviving paycheck to paycheck. The rich can afford to pay and should pay more.

Finally, we have to join the effort to stop spending cuts on domestic programs, such as education and food stamps, but to make even greater cuts in military spending. This effort will face stiff opposition from Republicans and some Democrats, who want the opposite: more military spending while cutting food stamps (which the Republicans in Congress recently voted to do).

While the Obama administration is ‘talking the talk’ on many of these points, we cannot rely on a Democratic victory in November to win these goals. Just look at what Obama promised working people in 2008: expanding voting rights for workers trying to unionize, immigration reform and universal health care. Card Check to unionize? Didn’t even try. Immigration reform? No legislation drafted, and in 2012 Obama gives temporary status to undocumented who came as children. He could have done this in 2009, but instead deported record numbers of immigrants. Universal health care? Obama’s reform will subsidize private insurers and expand Medicaid (which pays so little that many doctors won’t accept it) and still leaves millions without health insurance.

We need to continue to build a grassroots movement to fight against putting the burden of austerity on poor and working people for 2012 and beyond.

#UnitedStates #taxCuts #Capitalism #FederalUnemploymentInsurance #EmergencyUnemploymentCompensation #fiscalCliff