The Fiscal Cliff thread.

[HOF44]

Uh, I don't think the fiscal cliff will affect the taxes people file this coming April a bit. I think it will only affect money that people earn in '13 (and pay taxes on in '14.)

Hatch is the senior Republican on the Senate Finance Committee. Miller wrote the letter in response to inquiries from Congress about the impact on the IRS of the year-end “fiscal cliff,” which threatens to dramatically change tax policy on several fronts, including the AMT.

WP: AMT could keep 60 million taxpayers from filing returns till March, delaying refunds

[Larry]

WP: AMT could keep 60 million taxpayers from filing returns till March, delaying refunds

I'm really surprised that that could be the result of this law. It would seem to be an ex post facto law. Raising the taxes on income after you've received the income.

(Although, I suppose it could be argued that the tax increase was written into the law more than a year ago, and all they're debating is whether to pass an ex post facto cut.)

[Kindred]

Having trouble grasping your first sentence. But I think I agree with your second.

Tax increases are bad for the economy. Always.

Spending cuts are bad for the economy. Always.

And raising taxes and cutting spending, all at once, in an economy as fragile as this one? That's even worse than usual.

But, it has to be done, eventually.

If I were in charge, my first action would be to extend the Bush Tax Cuts, on the "bottom 95%", for one year. (In fact, if I could somehow pass a rule saying that, one year from now, they can't be extended except by a 60% vote, in both houses? I'd do that.)

(And, I wonder if maybe extending the payroll tax cut might not have a bigger effect on the economy. I could certainly see that argument.)

Tax increases on the rich have minimal impact on the economy, tax increases on the poor will have huge affects.

[Larry]

Tax increases on the rich have minimal impact on the economy, tax increases on the poor will have huge affects.

While I will agree that, to me at least, there seems to be historical evidence to support that, I will suggest that your assertion isn't quite as rock solid as your declaration would suggest.

[HOF44]

I'm really surprised that that could be the result of this law. It would seem to be an ex post facto law. Raising the taxes on income after you've received the income.

(Although, I suppose it could be argued that the tax increase was written into the law more than a year ago, and all they're debating is whether to pass an ex post facto cut.)

I've read in some articles that some may even be penalized for lack of withholding even though their employers were following the set of tax tables recommended by the government. Like I said theis could be a HUGE fiasco if something is not done.

[Kindred]

While I will agree that, to me at least, there seems to be historical evidence to support that, I will suggest that your assertion isn't quite as rock solid as your declaration would suggest.

Think about it, will the rich change their buying habits because of a tax increase that is barely a fraction of their wealth? Will the poor change their buying habits because of a tax that significantly impacts the amount of discretionary funds they have available? Where is the majority of demand in this economy coming from, the select few millionaires or the millions of poor/middle class?

[Riggo-toni]

Extend the payrolll tax cut another year. Eliminate a few loopholes and extend part or all of the Bush tax cuts another year. Do NOT back off the sequestration/mandated spending cuts. Our economic downturn has been caused by consumer debt and a collapse in the housing market. It took Obama et al almost 4 years to expand the HARP program to effectively deal with the latter.

Spending at an unsustainable 24% of GDP does no good - screw the Keynesian graphs based on a non-existent universe of a self-contained national economy and paper money.

While in most scenarios I would prefer lowering the top tax rate to incentivize the economy,our current dilemna mandates lower rates for middle income earners to pay off debts. I do not advocate this out of some class warrior conviction, but rather as a targeted remedy for our current woes. I would not, for example, have been in favor of such a policy 10 years ago.

Actually, a decade ago I would have been in favor of phasing down the home mortgage subsidy as a way to force the wealthy to pay more. Now, such a change might aggravate the fragile housing market.

[Tulane Skins Fan]

LOL, and just think all this is over how much to reduce the increases in spending rather than any real reductions.

What?

[Popeman38]

What?

Are you really going to claim that 0.25% reduction in spending is a cut?

[Tulane Skins Fan]

Are you really going to claim that 0.25% reduction in spending is a cut?

The debate is not all about the spending cuts. That's what I'm claiming.

[Tulane Skins Fan]

There isnt a debate regarding spending cuts in terms of the "fiscal cliff?" Holy crap! I have been way too far out of the loop if thats the case! LOL

The spending side is totally ancillary to the taxing side. The spending cuts aren't driving anything.

[SnyderShrugged]

The debate is not all about the spending cuts. That's what I'm claiming.

There isnt a debate regarding spending cuts in terms of the "fiscal cliff?" Holy crap! I have been way too far out of the loop if thats the case! LOL

[Tulane Skins Fan]

There isnt a debate regarding spending cuts in terms of the "fiscal cliff?" Holy crap! I have been way too far out of the loop if thats the case! LOL

The spending side is totally ancillary to the taxing side. The spending cuts aren't driving anything.

[Popeman38]

The debate is not all about the spending cuts. That's what I'm claiming.

This is true. But raising taxes, while cutting spending by such a minuscule amount (the govt could EASILY make up that 0.25% by increasing the off the books budget) gives the impression that the people are the problem, and the govt has no responsibility. We could EASILY cut 30% in govt spending and not really feel it. DoD R&D budget is $77.2B for 2013. Make it $35B and you just saved $42.2B. That is double the expected "spending cuts" as part of the fiscal cliff.

[Tulane Skins Fan]

This is true. But raising taxes, while cutting spending by such a minuscule amount (the govt could EASILY make up that 0.25% by increasing the off the books budget) gives the impression that the people are the problem, and the govt has no responsibility. We could EASILY cut 30% in govt spending and not really feel it. DoD R&D budget is $77.2B for 2013. Make it $35B and you just saved $42.2B. That is double the expected "spending cuts" as part of the fiscal cliff.

Ok, I don't know if you're right or wrong. I know the news is saying that the defense cuts would be "catastrophic" to the economy, blah blah blah.

But, I was just saying that the debate is not about the spending side of the fiscal cliff. Its about whether the bush tax cuts are going to expire. Both parties would take the spending cuts off the table if they had a tax plan together.

[Popeman38]

Ok, I don't know if you're right or wrong. I know the news is saying that the defense cuts would be "catastrophic" to the economy, blah blah blah.

But, I was just saying that the debate is not about the spending side of the fiscal cliff. Its about whether the bush tax cuts are going to expire. Both parties would take the spending cuts off the table if they had a tax plan together.

R&D does not touch ANY funding to the military for personnel or veterans or benefits. It only cuts out research on "new" technologies (both weaponized and not). It would only impact pentagon contracts, and only slightly.

[Larry]

Yahoo: Democrats stiffen spine against trimming benefits

WASHINGTON (AP) — President Barack Obama's re-election has stiffened Democrats' spine against cutting popular benefit programs such as Medicare and Social Security. Their new resolve could become as big a hurdle to a deal that would skirt crippling tax increases and spending cuts in January as Republicans' resistance to raising tax rates on the wealthy.

Just last year, Obama and top Democrats were willing during budget negotiations with Republicans to take politically risky steps such as reducing the annual inflation adjustment to Social Security and raising the eligibility age for Medicare.

Now, with new leverage from Obama's big election victory and a playing field for negotiations that is more favorable in other ways, too, Senate Majority Leader Harry Reid and other Democrats are taking a harder line.

"I've made it very clear. I've told anyone that will listen, including everyone in the White House, including the president, that I am not going to be part of having Social Security as part of these talks relating to this deficit," Reid, D-Nev., told reporters.

Oh, goody.

Hopefully this (and the Republicans') are simply the "for public consumption" rhetoric, before an eventual deal.

[Fergasun]

Yahoo: Democrats stiffen spine against trimming benefits

Oh, goody.

Hopefully this (and the Republicans') are simply the "for public consumption" rhetoric, before an eventual deal.

Let's all just start repeating, "the deficit doesn't matter", "the debt doesn't matter."

We might hit the cliff, but unlike Wile e Coyote, we're not willing to fall like fools.

Like I've been saying for the past 2 years, just do Simpson-Bowles. With the Democrats in power, they need to realize that they don't control the House and won't be able to put forward a deal that they don't have problems with either. Hence it's a huge compromise which must contain items that both parties hate. I mean what, the first deficit reduction panel was 2009?

Yes, this is going to suck for our economy. No, I don't believe they will ever accomplish this "later" (as the "later" is "now" and they are even trying to avoid the cuts).

A large compromise puts everyone on the same footing.... playing political favorites (like the parties want to do) makes me angry. They might simply agree to everything in Bowls-Simpson except Medicare and Social Security... I don't know how much of B-S cuts included Social Security and Medicare... but that seems like something reasonable (and it would set up a "cliff" and focus on social security and medicare).

[88Comrade2000]

Actually, we need to let all the Bush tax cuts expire and go over the fiscal cliff.

The politicians are playing a game. Dems are conning the people into thinking that just raising taxes on the rich will solve everything. Repubs are conning the people into thinking that just cutting spending and cutting taxes, especially for the rich will solve everything.

What must be done is that there must be spending cuts and there tax increases. The military must be reduced and brought back from places like Europe and Asia. Obama should stop trying to get of nukes. Just keep the nukes at the levels they are now and there is your defense. Anyone dares to attack us; we will wipe them off the face of the earth.

It is not our job to defend Asia, Europe, etc.. You stop doing that and you can reduce the defense budget alot. Everyone knows if we get into a war with China or Russia it will be nuclear; so odds are slim there.

Also, the middle class must realize that their taxes have to go up. They want these goodies that Obama has promised them; well you have to pay for them with your taxes.

Obama should make a speech and say that there will be no tax cuts for anyone. Also, he must also propose a national sales tax of 2 to 3%. 1/3 will go to healthcare, 1/3 to paying off the debt, 1/3 for other stuff.

If it was me:

15% tax rate for those making $20,000 to $60,000

25% tax rate from 60,001 to 100,000

35% tax rate for those over 100,000 up to 500,000

40% tax rate for those from 500,001 to 1,000,000 - no deductions

45% tax rate for those over 1,000,001 - no deductions

2.5% national sales tax

For those with businesses- change the tax laws so there is no such thing as a business owner being allowed to file as a personal individual and only as a business. The owner can just give himself a salary and then be tax at personal rates for his salary.

Make all income eligible to be taxed for SS

Also, get rid of all these tax havens so the Romneys of the world can't cheat us. So, that may stop some people from doing things; so be it. One of the biggest problems in society is the wide disparity in income.

I'll use a Redskins example. Does Shanny really deserve 7 million/ year when he could probably do his job for say 70,000 per year.

[Larry]

The politicians are playing a game. Dems are conning the people into thinking that just raising taxes on the rich will solve everything. Repubs are conning the people into thinking that just cutting spending and cutting taxes, especially for the rich will solve everything.

You know, I must have heard the claim that raising taxes on the rich will solve everything 500 times.

From Republicans.

I don't think I've EVER heard it, from a Democrat.

[Burgold]

Right now, the sides... while trying to say they want to cooperate are in actuality playing a game of chicken. The Republicans are used to the Democrats always blinking and turning away first. One thing has changed though... with Obama's victory, he never has to worry about election again... that allows him to play chicken with a whole different mindset.

I do expect both cars to veer before the collision or the cliff, but I expect they'll make it pretty close.

[88Comrade2000]

Going to Clinton era tax rates is fine. It's time Obama stop pandering to the middle class. They have to take their medicine just like everyone else.

I would like to see Obama's justice department to start going after the idiots that cause the 2008 meltdown. We need people in jail and all their assets seized.

[deejaydana]

Going to Clinton era tax rates is fine. It's time Obama stop pandering to the middle class. They have to take their medicine just like everyone else.

I would like to see Obama's justice department to start going after the idiots that cause the 2008 meltdown. We need people in jail and all their assets seized.

That would be much appreciated. Start with C Dodd and B Frank as an opening salvo. Yeah, ain't gonna happen.

[morris84]

None of it really matters...

http://www.zerohedge.com/news/2012-11-15/guess-what-they-are-not-cutting-fiscal-cliff

http://www.zerohedge.com/news/2012-11-06/it-doesnt-matter

[Larry]

None of it really matters...

http://www.zerohedge.com/news/2012-11-15/guess-what-they-are-not-cutting-fiscal-cliff

http://www.zerohedge.com/news/2012-11-06/it-doesnt-matter

Been reading the first one.

Wow. An op-ed piece that runs from untrue assertion to untrue assertion, to tell us all what a genius Ron Paul is, and why the entire budget problem is 100% due to social spending, and revenue and discretionary spending are completely irrelevant.

For example, I love the assertion that, since WW2, federal tax revenues have averaged a certain number, therefore tax rates have zero effect on revenue.

And oooh, look. The second op-ed is from exactly the same person, and makes exactly the same claims.

----------

Yahoo: Pelosi says no budget deal without tax rate hikes

WASHINGTON (AP) — House Democratic leader Nancy Pelosi says she's hopeful lawmakers can come to a deal to avoid a year-end "fiscal cliff" but any agreement has to include tax rate increases for the wealthy.

She tells ABC's "This Week" that she can't accept a deal that caps deductions and closes some loopholes but does not alter current tax rates for the wealthy.

Not much more at the link. The entire "article" is four paragraphs.

Sigh.

I like the idea of "tax hikes for the rich". Heck, I like the idea of tax hikes for everybody, but I fear the economy might be too fragile to do it all at once, this year.

To me, the "tax hikes on the rich" will have the least effect on the economy. Near zero. It won't fix everything. Won't even make a big dent. But it's a small start, and safe.

And I think that, since it seems like we've already decided that the payroll tax cut is going away (causing a 2% reduction in take home pay for every American who has a job, for the first $110K), then I think a 2% hike on income above $250K clearly can't be called unfair.

(In fact, as to fairness, it occurs to me that a 2% hike in the top Capital Gains tax rate might make things equally unfair to everybody.)

But, I really loathe the "I will not permit any solution to this problem unless it has what I want" negotiating tactic.

To me, a much more fair negotiating tactic would be "the 2% tax on 'the rich', and the 2% tax hike on earned income, are a package deal. I will not permit raising taxes on income below $110K, while rejecting a 2% tax hike above $250K. Both or neither."