Letter To Editor: Let’s Jump off the Fiscal Cliff
Yes, everybody’s personal tax rates will go up, and there will be massive Defense and Entitlement cuts made by the sequester law, but WTF at least we will get some spending cuts!
What’s the “Fiscal Cliff?” That is the name given by the Financial Community to the combination of events that will happen if the folks in DC don’t get their act together by year-end. Specifically:
1. Expiration of the “Bush Tax Rates” [$186 Billion in increased taxes for 2013]
a. The Capital Gains Tax Rate will go from 15% to 20% ,
b. Stock market Dividends will go from 15% to Ordinary Income rates,
c. the 10% Tax Bracket for Low Income Households will disappear so they will move up to 15%,
d. Taxpayers with an AGI over $177,000 will lose the benefit of a portion of their itemized deductions,
e. Married taxpayers with AGI over $265,550 filing a joint income tax return ($221,300 for heads of household; $177,000 for single filers) will lose the benefit of a portion of their personal exemptions,
f. Some popular Child Tax Credits and Education Tax Credits will be gone or diminished, and
g. If you die before Dec 31st, the first $5.12 Million of value will be sheltered and the rest taxed at 35%, but if you die after Dec 31st, Uncle Sam will take 55% of everything over $1,000,000 in Estate Value.
2. Other tax increases are also set to begin January 1, 2013, arising from the Patient Protection and Affordable Health Care Act of 2010 (“Obamacare”). Altogether a $494 Billion tax increase is coming your way from this one piece of 2010 legislation.
3. Because of the “Super Committee’s” failure to reach agreement in 2011, $1.2 Billion in across-the-board domestic and defense spending will kick in.
4. That pesky Alternative Minimum Tax Patch that needs to be enacted every year will ensnare tens of millions more Taxpayers.
John Berlau, a Senior Fellow for Finance and Access to Capital at the Competitive Enterprise Institute makes the following observations:
“…We could avoid the cliff and still get a recession. The question is weighing the cliff against the other alternatives. There's an old expression of 'going from the fire into the frying pan;
“…We are going to have tax hikes no matter what;
“…The U.S. could still slide into a recession next year even if Congress steers the economy away from the fast-approaching fiscal cliff;
“… If the president is insistent on rates being raised, we might as well go over the fiscal cliff… Avoiding the cliff might be just as dangerous as going over it."
Writing for Moneynews on November 28, 2012, Forrest Jones and Kathleen Walter, make the point that, according to Lawmakers and Market Participants, January 1st can come and go without a deal, adding tax hikes and spending cuts, but that won't slam the economy in a day or even for several months, which gives both sides of the aisle room to continue to negotiate.
In the immortal words of Dirty Harry, “Do you feel lucky punk?”
So, you voted for Obama in 2008 to prove you were not a racist, a noble motive albeit based on ignorance (didn’t you read his books?). What is your excuse for having done so again in 2012?