Fiscal Cliff — Obama the winner; rest of us the losers
December 30, 2012 12:00 AM | 4633 views | 5 5 comments | 10 10 recommendations | email to a friend | print
The country, as many have feared, appeared headed off “the fiscal cliff” as this was written late last week. There remained the possibility that President Obama and House Speaker John Boehner might reach a last-minute agreement, most likely one that essentially kicks the can down the road. But it was equally likely that no deal would be struck at all — in which case, we’ll all be paying much higher taxes in the New Year and beyond.

Obama has loudly insisted that any deal must include higher taxes on “the rich,” who he has long defined as those earning $250,000 or more per year. (He briefly amended that figure upward to $400,000, but did not accompany his proposal with any detailed spending cuts in return, meaning that it was not a serious offer.)

Most congressional Republicans, meanwhile, have insisted on no increase in tax rates for anyone, regardless of their income level. Their preferred method of dealing with the budget crisis is by cutting spending.

Obama demands that wealthy Americans pay “their fair share,” even though they already shoulder a vastly disproportionate share of the tax burden. Taxing them at a higher rate won’t bring in anywhere near enough money, and in fact is likely to bring in even less than projected.

That’s because the rich and well-to-do will just work harder to shield as much of their income as possible from the tax collector — a behavior that is perfectly legal, by the way. Obama’s demand that Republicans accede to higher taxes would seem no more likely to succeed than a demand by a Republican president that Democratic congressmen suddenly switch to a pro-life position on abortion as part of a budget deal.

Obama’s insistence on raising taxes on job creators is, on the face of it, counter-productive. Low tax rates are essential to a robust economy, and his push in the opposite direction risks tipping what’s already a stagnant economy back into a recession.

If Obama sticks to his position and the Republicans to theirs it means that taxes will go up — a lot — on everybody, including the middle class. Taxes will go up by an average of about $3,500 per household. Even the liberal Brookings Institution in Washington predicts that 90 percent of Americans will pay more. Single people making $150,000, for example, would see their taxes go up by $5,609, according to The Tax Foundation. Married couples making a combined $150,000 (considerably less than Obama’s so-called “rich”) would see their taxes climb by $6,616. And let’s not forget the Obamacare tax increases that are just around the corner.

It’s a lousy deal for most Americans — but not for Obama and his liberal allies on Capitol Hill. In fact, they’re likely to come out smelling like a rose, if the suck-up mainstream media plays its usual role.

Blame for the plunge — and the resulting higher taxes — will be heaped on Boehner and Republicans. Meanwhile, Obama and his liberal allies will enjoy a surge of new revenue and without having to make any significant spending cuts in exchange — except when it comes to the Defense budget, which will continue to be Target 1 for them. Even better for Obama, he never again has to face the voters, especially those angered by higher taxes and those who will be booted by their employers into substandard government health insurance plans because of Obamacare.

For Obama and Capitol Hill Democrats, going off the cliff is a win-win-win proposition.

For the rest of us, it’s lose-lose-lose.

Happy New Year.
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Kevin Foley
December 30, 2012
"Raising taxes on the job creators"? The Bush tax cuts have been in effect for more than 10 years and during that time, they produced the slowest job-growth rate in decades.

The fiscal cliff was a bipartisan plan. The idea was to force compromise, which the GOP has steadfastly rejected, revealing Bohner's utter lack of control over his caucus.

We'll probably go over the cliff, the new Congress will be sworn in, Boehner will be voted out as Speaker, and legislation will be enacted retroactive to January 1, 2013. I also expect GOP intransigence will be a major campaign issue in the 2014 election and Democrats will regain control of the House. Thanks once again, GOP, for shooting yourselves in the foot.
December 30, 2012
How on Earth do you come up with " they already shoulder a vastly disproportionate share of the tax burden."

Proportions and numerator and denominator, right? Scale the denominator to 100 and you have a percentage, right? Percentages are also called rates, by financial types, correct?

So how in the WORLD do you think the wealthy pay a higher rate than the other 98%? Where is THAT kind of math found? It must be somewhere at the MDJ but it didn't make the editorial cut, right? Ha!

Quit lying! If you think rich folks paid enough in dollars, just say so, but don't try to claim they pay disproportionately. That is just insulting!
December 31, 2012

You need to be careful with terms like rate, percentage and proportion. Yes, in the same context, they can mean the same thing. But, that's just it. Context is everything.

When folks state that the wealthy pay a disproportionate share, they are not speaking of the income tax RATE used to calculate the amount of tax dollars to pay to the Treasury. The "disproportionate share" thing is looking at the total Adjusted Gross Income (AGI) for all tax payers and the total taxes paid by all tax payers.

Let's dig deeper into this idea.

According to 2010 IRS statistics, the top 1% of earners accounted for 19% of the total AGI, yet paid 37% of all income taxes.

Let's break this down and take it one step at a time.

Imagine you live in a very diverse neighborhood with 100 families with a broad range of salaries and that this sample exactly represents the entire U.S. tax paying population. Let's say you have access to the tax returns of all families. Now, add up the AGI of all 100 tax returns.

Find the tax return for the family with the highest AGI. Since we have 100 families, that family represents the 1%. Divide the AGI of the 1% family by the total AGI of your neighborhood and that is how the 19% is derived. That is, the top 1% of earners (your rich family) accounts for 19% of the total AGI (of your neighborhood).

Still with me or have I put you to sleep?

Now, add up all taxes paid by the families in the neighborhood. Find your rich family's return and determine the taxes that they paid. Divide the taxes paid by the rich family by the total taxes paid by the neighborhood and you'll get the 37% number above.

Howzabout some numbers?

Let's say the neighborhood AGI is $10 million. Let's say the rich family's AGI is $1.9 million. So, 1.9 divided by 10 is 19%.

Let's say the entire neighborhood paid $1 million in taxes. Let's say the rich family paid $370,000 in taxes. So, 370,000 divided by 1,000,000 is 37%.

Therefore, the rich family earned 19% of the total income, yet paid 37% of the total taxes. Do you think that is fair?

To reiterate, this discussion is about the proportion of taxes paid to proportion of income earned. It is NOT about the tax RATES found in the IRS tax tables that we use to calculate the amount of taxes to pay when we submit our 1040s.

Context is everything.
December 30, 2012
It will be a Pyrrhic victory. Yes, Republicans will bear the blame initially; however, long term, Obama's legacy will suffer. It will be HIS recession, lock, stock and barrel. Blaming it on Bush will not continue to work.

No less than Bob Woodward - not exactly a conservative - has said as much.
the winner is..
December 30, 2012
The American public was dumb enough to reelect Obama with all of his socialist ideas so now, we all have to deal with the consequences. I will bet that when our brilliant electorate sees that they, too, will have to pay for Obamas schemes, they will sing a different song. But it will all come too late.
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