Obama boasts that “middle-class families” will not have to “pay upwards of $2,000 more in taxes this year.” That’s accurate for income taxes, but Obama doesn’t mention that the deal allowed a payroll tax cut to expire. About 77 percent of taxpayers will pay more in taxes this year — nearly $1,200 more for those earning between $75,000 and $100,000, a group that fits squarely in Obama’s broad definition of middle class.
Obama says the agreement “will reduce the deficit.” In fact, the deficit will increase by about $4 trillion over the next 10 years because of the extension of the Bush tax cuts for all but those in the top 1 percent of taxpayers. The deal will “reduce the deficit” only compared with what it would have been if the Bush tax cuts had been extended for everyone.
Assuming “current policy,” Obama is able to claim the fiscal cliff law reduces the deficit, mostly by increasing high-income revenue by $620 billion. But assuming “current law,” the deal actually increases the deficit by nearly $4 trillion, according to the Congressional Budget Office — because it permanently extends the Bush tax cuts for most taxpayers.
Obama is trying to have it both ways, as he toggles between the two assumptions. By assuming the tax cuts would have expired for everyone without his action, the president claims credit for averting an income tax hike for middle-income taxpayers. But, in order to take credit for cutting the deficit, Obama is assuming that the tax cuts would have been extended for everyone.