Scott Sumner breaks down the key points:
Almost all of the press reports on the tax increases are wildly inaccurate. Tax rates will rise much more than advertised, and not just on those making over $400,000. Here are some problems with the agreement:
1. The tax code becomes far more complex.
2. The marriage penalty becomes even worse.
3. There is no reduction in the maximum unemployment benefits, despite the recent fall in the unemployment rate. Every day that goes by a larger and larger share of the unemployed become structural, as our labor market becomes more “European.” I have heard several stories from different people I trust, who describe people they know who are enjoying a long vacation at Uncle Sam’s expense, and bragging about it. That’s not to say most unemployed are doing this, it’s just a minority. Maybe 1% of the workforce. But it is becoming an increasing problem as more and more people figure out how to game the system. Ivy league professors overlook this problem because they don’t socialize with the sort of modest income person doing a crappy job who is tempted by this option, and they can’t imagine anyone they know taking this route voluntarily.
4. There are virtually no spending cuts.
5. MTRs rise for almost all Americans, and by much more than advertised.
6. There is no “lower rates for less loopholes” deal, as had been discussed in the early stages of the negotiations.
Sumner goes on to describe how the deal will affect the average taxpayer. The whole analysis is worth a read.