‘Fiscal cliff’ deal little to boost economy

WASHINGTON – Lawmakers managed to avoid driving the United States over the so-called fiscal cliff with a late-night vote Tuesday. But higher taxes and brinksmanship in Washington are likely to sap strength from the fragile economy well into 2013. The House of Representatives passed emergency legislation to prevent deep spending cuts and even bigger tax hikes from taking effect. The bill will raise taxes on individual incomes over $400,000 and household incomes over $450,000, on investment profits and dividends, and on the portion of estates that exceeds $5 million. Those higher taxes on the wealthy – which will deliver some $600 billion in revenue over 10 years – are likely slow the economy a little bit. But a bigger drag on the economy will come from a tax hike Democrats and Republicans didn’t even bothering to fight over: the end of a two-year Social Security tax cut. The so-called payroll tax is scheduled to bounce back up to 6.2 percent this year from 4.2 percent in 2011 and 2012, amounting to a $1,000 tax increase for someone earning $50,000 a year. “It’s a huge hit,” says Joel Naroff, president of Naroff Economic Advisors. “It hits people whether they’re making $10,000 or they’re making $2 million.