But Obama is wrong: Taxes will rise on the middle class even if this deal passes, because it doesn't include an extension of the payroll tax holiday. That means that the paychecks for more than 160 million Americans will be 2 percent smaller starting in January, as the payroll tax will jump from 4.2 percent to 6.2 percent. And a huge number of those hit will be middle class or working poor (Two-thirds of those in the bottom 20 percent would be affected by a payroll tax hike.).
So whether this particular deal passes or not, it's basically a given that the payroll tax holiday is going away, which means a $115 billion fiscal contraction this year directly from the pocketbooks of ordinary Americans. To put that in perspective, the sequester cuts that are so dreaded would cut about $110 billion this year — more or less the same amount. While the fiscal cliff deal will save middle-class families an extra $2,000 in tax pain by extending the Bush tax cuts, anyone who earns $50,000 a year will still be hit with a $1,000 higher payroll tax burden.