Tag Archives: Fiscal Cliff

News

A primer on the fiscal cliff facing us in January 2013: tax hikes and Obamacare

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This is a medium-length article from the Tax Foundation. I found it fascinating to read, because I am busy making plans myself to deal with the next four years under Barack Obama.

Excerpt:

On December 31, 2012, a large swath of the federal income tax code is scheduled to expire, an event which has come to be known as the “fiscal cliff.” Among the expiring provisions are the 2001 and 2003 tax cuts enacted under President Bush, a compromise on the estate tax, a “patch” in the Alternative Minimum Tax (AMT) reducing its impact, the temporary 2 percent payroll tax holiday, increased business expensing, and the “extenders” package of miscellaneous tax deductions. On January 1, 2013, five taxes enacted as part of the Patient Protection and Affordable Care Act (PPACA)—popularly referred to as Obamacare—also take effect, along with sequester spending reductions of $109 billion due to the failure of the “Supercommittee” to reach consensus on budget reductions.

In late February, the U.S. government will hit the debt ceiling, exhausting its ability to borrow to finance ongoing spending without an increase by Congress. Finally, the federal government’s continuing resolution appropriating spending expires on March 27, 2013.

Here are some of the things to look out for, which are all described in detail in the article:

  • 2001 and 2003 Tax Cuts Expiration
  • Estate Tax Increase
  • Alternative Minimum Tax
  • Payroll Tax Increase
  • Business Depreciation Expense
  • Taxes in PPACA (Obamacare)
  • Debt Ceiling
  • Sequestration

I am most concerned about income tax increase, the capital gains tax increase, the dividend tax increase and the payroll tax increase. These are all going to clobber me. I will have less money for charity and savings, and will have to retire later – and have less time for my Christian activities as a result of having to work longer. The voters in the last election have decided that I must sacrifice more of my earnings so that Obama can hand it all out to his constituents in exchange for their votes.

It helps to know exactly what will be changing in the future, because I have to know how to respond to this. Some adjustments that I might make cannot be done at the drop of a hat. Some take months to plan and execute. It’s best to think about things in advance. We have two deadlines: December 31st and March 27th. It will be interesting to see  what Washington decides to do.

UPDATE: James Pethokoukis of AEI explains the significance of the tax increases for capital gains and dividends. Other countries have lower rates on these taxes, so expect the capital that funds businesses and creates jobs to leave the country. Obama likes to rail against outsourcing, but he actually causes it – because of his ignorance.

Commentary

How would raising taxes on the rich affect middle class working families?

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Investors Business Daily explains.

Excerpt:

Raising taxes on all those above $250,000 as Obama proposes would raise just $34 billion. That’s a whopping 3% of our $1.1 trillion deficit. Even if you seized all their income, it would only run the government for three months.

So the idea that taxing the wealthy will reduce the deficit is false. This is just class warfare, pure and simple.

Even so, Obama compounds the fib by going on to say his tax hike will have virtually no impact on small businesses. He notes, for example, that 97% of all small businesses would be untouched by his tax hike.

True, but irrelevant, as Treasury Department data show. For while there are 34.8 million small businesses in America, 30 million of those employ no workers.

Just 4.8 million, or 12%, employ workers. But an even smaller number — just 1.2 million — earn 91% of all the small business income. These are Obama’s “rich.”

But while they make up just 3% of all small businesses, they employ a stunning 54% of the total private U.S. workforce.

They are, in short, the nation’s job creators. And their owners, who report their small-business income on their personal income tax return, will be taxed at a higher rate by Obama.

So don’t be fooled. It’s not really the “wealthy,” as Obama says, who’ll get taxed. It’s small businesses. And it will have a devastating impact on jobs.

How devastating? A recent study by Ernst & Young noted that Obama’s tax hike, far from being “balanced,” would cost 700,000 people their jobs.

And it will no doubt kill hundreds of thousands if not millions more jobs in the future as would-be entrepreneurs decide not to start businesses in such a hostile tax and regulatory environment.

It’s important for us to realize that the people voting for Obama have no idea about these facts. A lot of people are annoyed that we lost the election last week. I think that if we want to win the next one then we have to start to think about becoming more persuasive with the people around us. We have to learn to deflate the slogans of those on the left with facts.