Tax on capital gains, dividends goes up to 20 percent for families earning $450,000 or more

In passing a tax bill to forestall the "fiscal cliff” -- the overnight rise of a wide array of taxes combined with deep spending cuts -- lawmakers agreed to increase capital gains and dividends taxes for higher-income taxpayers.

During the 2008 presidential campaign, Barack Obama promised to increase capital gains and dividends taxes from 15 percent to 20 percent for those making more than $250,000 (for couples) or $200,000 (for individuals).

The fiscal cliff bill, passed by the House and Senate on Jan. 1, 2013, did raise taxes to 20 percent, but only for taxpayers earning $400,000 (for individuals) or $450,000 (for couples). Taxing capital gains at 20 percent returns taxation to the level under President Bill Clinton. Under Clinton, dividends were taxed as ordinary income, meaning rates as high as 39.6 percent.

Obama's most recent budget proposed returning dividend taxation to the rates for ordinary income, making the 20 percent rate a concession to Republicans. However, we're only rating Obama on his promise from the campaign, and during the campaign, he only promised a 20 percent rate for dividends.

Overall, then, the fiscal cliff bill executed most of what Obama had promised on capital gains and dividends, but it did so only above a higher income threshold than Obama had campaign on. We rate this a Compromise.