Thursday, January 3, 2013

The Fiscal Cliff Deal

Some deal, some rescue.


Annual Tax Increase = $62 Billion


2011 Budget Deficit = $1,089 Billion



This graphic from Zero Hedge says it all:


The cliff is still there, and we have gone over it.  Nothing has been solved.

The much-lauded deal is nothing more and nothing less than smoke and mirrors.

$1 in Spending Cuts for Every $41 in Tax Increases:
...[T]he last-minute fiscal cliff deal reached by congressional leaders and President Barack Obama cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts.

When Presidents Ronald Reagan and George H.W. Bush increased taxes in return for spending cuts—cuts that never ultimately came—they did so at ratios of 1:3 and 1:2.
Meanwhile, Obama has resumed his Hawaiian vacation — at an additional $3 million cost to the taxpayers.

ADDITIONAL READING

USA'S "CLIFF DEAL" IS LIKE THE EU'S GREECE DEAL: A CHARADE

18 comments:

  1. A bit more information...

    From this source, dated January 1, 2013:

    The budget deal passed by the U.S. Senate today would raise taxes on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut, according to preliminary estimates from the nonpartisan Tax Policy Center in Washington.

    More than 80 percent of households with incomes between $50,000 and $200,000 would pay higher taxes. Among the households facing higher taxes, the average increase would be $1,635, the policy center said. A 2 percent payroll tax cut, enacted during the economic slowdown, is being allowed to expire as of yesterday.

    The heaviest new burdens in 2013, compared with 2012, would fall on top earners, who would face higher rates on income, capital gains, dividends and estates. The top 1 percent of taxpayers, or those with incomes over $506,210, would pay an average of $73,633 more in taxes.

    Much of that burden is concentrated at the very top of the income scale.

    The top 0.1 percent of taxpayers, those with incomes over about $2.7 million, would pay an average of $443,910 more, reducing their after-tax incomes by 8.4 percent. They would pay 26 percent of the additional taxes imposed by the legislation.

    Among households with incomes between $500,000 and $1 million, taxes would go up by an average of $14,812.

    The bill, being discussed by House members today, would raise the top tax rate to 39.6 percent from 35 percent last year, starting with income over $400,000 for individuals and $450,000 for married couples.

    The top tax rates on capital gains and dividends would go up to 23.8 percent, from 15 percent last year. The new rate includes a 3.8 percent tax from the 2010 health-care law that took effect today.


    And from this source, dated January 3, 2013:

    Taxes will go up on the rich only, right? Wrong. Federal taxes will rise for 77 percent of Americans because the two-percentage-point payroll tax cut has now expired. A person earning $50,000 and who is paid twice a month will lose $41.67 a paycheck. For the truly rich, those households whose income is $1 million or more, the average tax hit will be $171,330, per the Tax Policy Center. Households earning between $500,000 and $1 million will, on average, pay $15,055 more.

    And Obama winked? Sheesh.

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  2. The payroll tax holiday was always intended to be a temporary cut. Calling this a tax increase and blaming Obama for it is intellectually dishonest.

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  3. Unless we can claim that the tax increase on the 1% is something, then all this theater was to do nothing. All they did was maintain the status quo and the Republicans went along with the sharade.

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  4. AOW excerpted: "The heaviest new burdens in 2013, compared with 2012, would fall on top earners, who would face higher rates on income, capital gains, dividends and estates."

    Well yeah I suppose it will be a burden to the top 1%. They may have to put off buying another vacation home for another year or getting a new yacht. But in the end they will be fine.

    Meanwhile, the little guy, the ones Obama says he cares about most will get screwed the worst. Take gas prices as one example. Even a minor increase in gas prices hits lower income people hardest. They may have to choose between buying food and putting gas in the car to get to work. That is if they have a job. And by further crippling the wealth producers with higher taxes, those same rich people will be hiring fewer maids, gardeners, contractors and the rest.

    And don't get me started on the inflation Obama has created by printing massive amounts of money that impacts these lower income people hardest.

    Obama can't print food stamps fast enough to make up for the financial hit he has imposed on lower income households. It's just a shame that most of these folks don't really know what hit them and who is to blame.

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  5. Not to worry, Obama has flow BACK to Hawaii, again, is seen swimming, playing golf, eating shave-ice, living it up. He is satisfied that his plan to destroy America is right on target. Republicans caving and bowing to his demands. Life is good...

    Debbie
    Right Truth
    http://www.righttruth.typepad.com

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  6. It may very well be that this pro-Islamic Marxist President who America is now stuck with might possibly have the vicsious intentions of punshing this nation off the fiscal cliff.
    It's a sad shame the in the elections of last November that so many people were so blind to the danger that this Obama guy poses to the country that he was, by hook or by crook, re-elected.

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  7. Congress kicking the can down the road...again...

    When will the American people wake up and throw these bums out of office?

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  8. This comment has been removed by the author.

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  9. Though I'm quite irate that government seems to be doing everything in its power to make sure the Baby Boomer generation never has to experience a whit of personal responsibility for its $16 Trillion public debt, I don't see how electing Romney would have changed this outcome.

    If people currently over the age of 47 don't understand that they deserve to have "their" property seized right down to whatever usefulness can be made of their bone marrow, and slain on the spot if they complain about it without permission, I don't see how we can meet on common ground and discuss reasonably a way to make them to cough up their ill-gotten gains.

    60 years is too long to wait for the last of the Baby Boomers to become worm food.

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  10. Hello, Beamish.

    Not all Boomers are of the ilk that you describe.

    In my view, one of the things that could be done so as to ameliorate the entitlement mentality of the Boomers is to make their children and possibly their grandchildren financially responsible for at least some of the ailing and disabled Boomers' health care. That's what my father's generation had to do.

    Costly? Yes. Preventing college education for the Boomers' grandchilden? Yes.

    Condemning a caregiver to having no other life besides that of caregiving? Yes. I saw that in my own family with my Aunt Pearl, who spent much of her life caregiving her parents (over a period of 20+ years).

    What I'm typing in here is the reality.

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  11. Not all Boomers are of the ilk that you describe.

    Still, we're left with a $16 trillion public debt Baby Boomers have no intention of paying upon, ever, the bulk of which disappears when Baby Boomers are told to go knock on FDR's and LBJ's tombs for their "entitlements."

    In my view, one of the things that could be done so as to ameliorate the entitlement mentality of the Boomers is to make their children and possibly their grandchildren financially responsible for at least some of the ailing and disabled Boomers' health care. That's what my father's generation had to do.

    I'm not sure that works, unless the children and grandchildren of Baby Boomers are allowed to write off the entirety of their out-of-pocket costs for Baby Boomer health care as tax deductions.

    But that still doesn't PUNISH Baby Boomers for their presumptuousness in assigning their debts to the unborn in the first place.

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  12. ...I'm just a little tired of bellyaching about the growing national debt and "destroying the prosperity of future generations" by Baby Boomers who over their lifetimes paid around 3 times less in payroll taxes, and didn't even pay into Medicare most of their lives (because it didn't exist until 1965).

    I guess where I come from, if people are honestly upset about the way they do things, they stop doing things that way.

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  13. Beamish,
    But that still doesn't PUNISH Baby Boomers for their presumptuousness in assigning their debts to the unborn in the first place.

    I think that you and I both realize that the punishment ain't gonna happen.

    My father used to say, "The middle class is trying to live like the very rich. It's gonna run out one of these days."

    What mechanisms allowed the middle class to live like the rich? Besides what you mentioned, I mean.

    For one thing, so many tax deductions: mortgage-interest deductions, credit-card-interest deductions, certain tax shelters, government benefits and union benefits such as low-cost-to-the-employee health insurance, etc.

    And, of course, instead of saving for their old age, most Boomers lived it up: expensive vacations, all sorts of goodies, etc. On top of living it up, Boomers bought expensive college educations and more for their children while, at the same time, not having any savings to speak of.

    In the meantime, healthcare costs soared to the moon. For various reasons, of course. Now we have a situation such that even the cheapest nursing homes are $3000/month, with the decent ones some $15,000/month. Medicaid can seize the property of ailing Boomers. But to whom are they going to sell those properties? And what happens to the housing and construction industries if the market is flooded with "Medicaid" sales of homes?

    I'm not sure that works, unless the children and grandchildren of Baby Boomers are allowed to write off the entirety of their out-of-pocket costs for Baby Boomer health care as tax deductions.

    One cannot deduct unless one has the income from which to deduct. Certain caregiving situations require that the caregiver not do anything but caregiving.

    For example, my Aunt Pearl did the caregiving for both her parents for a period of some 20 years; her father was bedfast for 10 years, her mother demented such that she couldn't be left alone for even 5 minutes. Some other family members took shifts -- up till the point that they married and moved out. Then, Pearl (no children) was left on her own with no retirement and no savings because she wasn't able to work outside the home; in her old age, she ended up in a nursing home after the amputation of a leg (circulatory problems); the nursing home was funded by the state, of course.

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  14. Here's the demographic ugliness: for decades, the Boomers were a big driving force of our economy -- if not THE driver of our economy. Now, the Boomers are not a driving force the way that they were before. The Boomers had fewer children; the tax base has shrunk. The Boomers aren't buying the way they were when they were younger. Their children have finished college -- or nearly so.

    I could go on. I don't have to. You get my drift.

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  15. Beamish,
    BUT

    There is much that could be done to curb the tax burden that the Boomers have opposed upon succeeding generations.

    For one thing, the healthcare industry needs to stop pushing people onto Medicaid. I refer you to THIS, which I wrote in early 2010. Had it not been for our family doc, I would have been LEGALLY forced to leave Mr. AOW in that nursing home -- at my expense of over $300,000 for the two year look-back that Medicaid does. Divorce would have been the only possible step remaining, but the two-year look-back would still have applied. Instead, I still have a hospital bed and a potty chair in my living room. How many people are willing or able to live that way?

    Clearly, not all of the ailing can be cared for at home. I saw many such individuals in the nursing home where Mr. AOW lived for 5 weeks. Why were these people not at home? Well, some were self-pay. However, most were not self-pay; they may have entered the nursing home as self-pay, but within three years, all their assets were exhausted. They were in a nursing home so that they would not be a burden to their families; they were indeed wheelchair bound, but they had their marbles and the use of their upper limbs. They could have been in their own homes, IMO.

    BTW, if Mr. AOW and I had been living in a townhouse, the government (local) would have FORCED me to keep him in a facility until I could find "adequate" housing. So many homes have flights of stairs at their entries. These flights of stairs are legal "justification" for the Nanny State to take over. In my view, we need to build more homes that will really allow aging in place: low thresholds for doorways, wider bathroom doors, etc.

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  16. Beamish,
    Let me ask you a question....Have you done any caregiving? The hands-on kind, I mean.

    No snark: I invite you to visit us for a week and give me some respite. Seriously. And with some help here, Mr. AOW could have three meals a day instead of just two. As things are now, when I'm at work, he gets a snack (an apple and some protein puffs) that he can access from his hospital bed.

    It may turn out that I have to get such respite care. I'm having some neurological problems -- physical, not mental. More about that in a later post -- around January 25. Depending on the diagnosis, I may have to hire someone to come in and/or put Mr. AOW in a nursing home to the tune of $500/day for respite care.

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