Over the Cliff We Go
BERKELEY – Unless something unexpected happens, the United States’ many legislated reductions in taxes over the past 12 years – all of which have been explicitly temporary – will expire simultaneously at the start of 2013. American tax rates will revert overnight to their Clinton-era levels.
Some of these reductions were implemented to fight what was seen four years ago as a temporary downturn. Although their supporters wanted to make them permanent, claiming that they were temporary allowed for the circumvention of procedural requirements in the legislative process that Democrats had created in a vain effort to guarantee fiscal sanity.
The immediate increase in tax rates is only part of the story. At the same time, automatic reductions in the defense budget and “discretionary” domestic spending – agreed to by both Democrats and Republicans in the summer of 2011 – will take effect.