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Election Connection

October 31, 2012

Tierney, Tisei outline budget-deal ideas


Tisei agreed that the spending cuts set to take effect Jan. 1 are not ideal, but said spending could be reduced in many programs with a thoughtful and targeted approach. He compared the budget to a cut of beef. “A lot of people think you can just chop off fat from one side,” he said. “But that fat is marbled through the meat.”

Tisei said he did not support Congressman Paul Ryan’s proposed budget, which envisioned transforming Medicare into a program with optional vouchers to buy private insurance or to buy back into Medicare and proposed deep cuts to most federal spending and taxes, but insisted the conversation has to start somewhere.

He would not back any changes to Medicare that affects people age 55 or older. “But under that, we deserve to have a program in place and we have to recognize that it won’t be the same plan,” he said.

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The Fiscal Cliff Taxes Rates will revert to what they were in 2001: The lowest bracket (up to $8,900 of taxable income for individuals and $17,800 for married couples) will disappear, effectively raising the rate on that income from 10 to 15 percent; the next bracket (from $8,901 to $36,150 for individuals and $17,801 to $60,350 for married couples) will stay at 15 percent; the next brackets will increase from 25 to 28 percent, from 28 to 31 percent and from 33 to 36 percent, and the highest will rise from 35 to 39.4 percent. That will start Jan. 1 and could affect paychecks immediately because it will change the withholding schedule on paychecks. The capital gains, which are profits on assets held at least one year, tax rate will go from 15 to 20 percent, and dividends, which are the portions of profit paid out to shareholders, will be taxed at the same rate as ordinary working income, rather than at the current special 15 percent rate. The estate tax exemption will fall to $1 million, down from $5 million now, and the rate will be 55 percent, up from 35 percent now. The payroll tax withholding for Social Security, which was cut 2 percent on the employee side (not the employer side) as part of a December 2010 budget deal, will revert to 6.2 percent. A new tax created by the Affordable Care Act of 2010 on high-income taxpayers of 0.9 percent on income over $250,000 for married couples and $200,000 for individuals is scheduled to go into effect on Jan. 1. Spending Most defense spending will be cut 9.4 percent, while non-defense spending excluding Social Security, Medicare and Medicaid, will be cut 8.2 percent. Medicare will be cut 2 percent, mostly through a sharp reduction in the payment rate to doctors and health care providers, and Social Security, veterans benefits, military personnel costs, Medicaid and funding for state Children's Health Insurance Programs would be exempt from cuts. Leaders from both sides of the aisle, and from the Pentagon, have said the spending cuts are too blunt and do not take into account which programs can function with such a reduction and which cannot. There is also concern that a steep reduction in Medicare payments to physicians and other providers would force some doctors to stop accepting Medicare patients. Effect Individuals The Tax Policy Center, a joint venture of the nonpartisan think tanks Urban Institute and Brookings Institute, estimates the effect on middle-income families would be a total tax increase of $2,000 in 2013. The provisions that would most impact the middle class would be the change in the Social Security withholding back to 6.2 percent and the marginal tax rate increases. Deficit The budget deficit is projected to decrease by between $536 billion and $560 billion, from $1.1 trillion in fiscal year 2012 to about $650 billion in fiscal 2013, a drop from about 7.3 percent of GDP (estimated to be $15 trillion) in 2012 to about 4.3 percent in 2013. (Sources: Congressional Budget Office, Tax Policy Center)

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