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The 2013 Tax Cliff

Wiseacre

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This information is from an op-ed in yesterday's (9/14/11) WSJ, regarding Obama's Job Plan, hereafter called OJP. Obama said he wants $240 billion in tax incentives for workers and small businesses that are temporary and will expire in Jan 2013. The taxes increases he wants to impose however, are permanent. Such as limiting tax deductions for those earning more than $200k and raising their tax rate. So, on Jan 1, 2013, here's what the OJP will mean to small business owners, the ones who create 70% of all new jobs that we desperately need:

We already know Obama wants to raise taxes on the earners making over 200k. But Congress's Joint Committee on Taxation found in 2009 that $437 billion of business income would be taxed at a higher rate if the Bush tax cuts for the rich are allowed to expire, which includes some 4.5 million small business owners who file as subchapter S firms. So we're talking about raising taxes on many of the same people that Obama wants to give a temporary payroll tax cut to. Think about it - temporary tax cut but a permanent tax hike. Yeah, that'll create a lot of new jobs.

Then there's the increase in capital gains and dividends taxes, rising to 20% from 15%, again starting in Jan 2013. These taxes are the most injurious to economic growth of any tax hike. (My opinion).

Plus, Obama wants to cap itemized deductions and exemptions on the same rich guys, which takes out $405 billion from the private economy over 10 years, starting in 2013. This coincides with the expiration of the tax credits, expensing provisions, and payroll tax breaks inthe OJP. That's a hit on small businesses and workers of $240 billion when the temporary incentives go away.

Also - in 2013 ObamaCare has an additional 0.9% increase in Medicare taxes, again only on the rich guys, and a 2.9% surcharge on investment income, including interest income. So now your capital gains and dividends tax rate has risen from 15% to 23.8%.

All of this on the small business owners and investors, the ones who will create the most jobs. It's just insane to think this can work, if I were a small business owner or thinking about starting one, there's no way on God's green earth I would consider it until Barack Obama is out of office.

All you lib/dems screeching about demand, all we need is more demand. Well guess what, you ain't getting more demand on a sustained level without more jobs, and the OJP just ain't going to deliver anything more than a temporary bump that will turn south in a big way come Jan 2013. Only a complete fool would think otherwise. Or maybe a completely biased ideologue.
 
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Grampa Murked U

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Yep, lots of new taxes on top of obamacare taxes on top of the expiring Bush cuts. And no one sees the big red sign that says......


BRIDGE OUT AHEAD!
 

Polk

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You guys really need to make up your mind on if you want the budget balanced or not.
 

Polk

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Yep, lots of new taxes on top of obamacare taxes on top of the expiring Bush cuts. And no one sees the big red sign that says......


BRIDGE OUT AHEAD!

It's really weird that you guys always want to talk about the "expiring Bush cuts", as if Obama hadn't already agreed to making the full value of them permanent for something like 98% of the population.
 

Grampa Murked U

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You guys really need to make up your mind on if you want the budget balanced or not.

LOLOLOLOL

RIDDLE ME THIS...

How do tax increases that are already used up by new spending (ocare,jobs bill, etc) ever going to lower our debt? THEY CAN'T AND WON'T BECAUSE THE MONEY IS SPENT BEFORE IT'S EVER COLLECTED.

The only way we will EVER lower our debt will be to make serious cuts in spending.
 

Polk

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You guys really need to make up your mind on if you want the budget balanced or not.

LOLOLOLOL

RIDDLE ME THIS...

How do tax increases that are already used up by new spending (ocare,jobs bill, etc) ever going to lower our debt? THEY CAN'T AND WON'T BECAUSE THE MONEY IS SPENT BEFORE IT'S EVER COLLECTED.

The only way we will EVER lower our debt will be to make serious cuts in spending.

I didn't say reduce the debt. That being said, we can't realistically balance the budget with spending cuts alone.
 

Grampa Murked U

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You guys really need to make up your mind on if you want the budget balanced or not.

LOLOLOLOL

RIDDLE ME THIS...

How do tax increases that are already used up by new spending (ocare,jobs bill, etc) ever going to lower our debt? THEY CAN'T AND WON'T BECAUSE THE MONEY IS SPENT BEFORE IT'S EVER COLLECTED.

The only way we will EVER lower our debt will be to make serious cuts in spending.

I didn't say reduce the debt. That being said, we can't realistically balance the budget with spending cuts alone.

Controlling spending is the first step. Before I would ever believe congress intends to use our money in a fiscally sound manner why would I ever feel it right to just blindly give them more?
 

signelect

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Cute tie Polk, on the surface it appears you might be a professional but your arguments don't seem all that professional. You can balance a budget by reducing spending, my wife and I do it all the time. If we don't have the money we don't buy.

Stop funding jobs for congressman's families, stop paying of their campaign contributions with crony money, stop building airports where they is low demand, are you starting to see the pattern.

This is not a Pub or Dem issue it is a congressional issue. They have gotten away with it for so long it seems like the right thing to do. A good example is Social Security. This money was to a trust fund where it would be held for me until I retire. Under good old Johnson congress took the money to spend on their pet projects. They STOLE my money. If it was a private corporation they would have gone to jail.

It this simple enough for you.
 

Polk

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I know it's fun to talk about "waste, fraud, and abuse", but do you really think the entirety of the budget falls in those three categories? The reality is that if we keep taxes at the current level (and note, Republicans are calling for even more tax cuts), we'd have to make radical spending cuts to balance the budget.

Since 2010 is the most recent year I have a detailed breakdown easily available for, I'll use it to illustrate the point (if anything, it would require deeper cuts today due to more debt service). Assuming you're not going to default on the national debt, eliminating all non-defense discretionary spending and then cutting everything else by 15% would still result in a small deficit (about 55 billion). If you make the choice to fully fund Medicare, Social Security, and defense spending, you'd still need to zero-out non-defense spending while cutting unemployment benefits and Medicaid by 45%.
 
OP
Wiseacre

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Look, business people and investors are smart enough to do the math, they ain't stupid. You give somebody a temporary tax break for what, 15 months and then whack 'em for a big tax increase after that and think they're gonna go out and hire people? Not knowing how much healthcare costs are going to go up, not knowing what the energy costs will be cuz we don't have an energy plan? Not knowing what the EPA or NLRB is going to do while Obama is in office? Not knowing what the real costs of Dodd/Frank is going to be or the avalanche of regulations coming their way?

Taxes aren't the only factor involved with the decision to hire people or start a new business. But the tax policies being advanced by the president just don't indicate any change in the business climate in this country until he's out of office. You can try all the temporary jobs programs you want, but when the work is done then the job will be over. And you're back where you started but with a higher national debt.
 

Polk

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This whole "regulatory uncertainty" argument is even more bizarre because:

1. Future regulation is never certain, because Congress always has the power to change it.
2. If it were true, Australia (which with the implementation of cap-and-trade has far more uncertainty than we do) would be in a depression right now. Instead, their economy is booming.
 
OP
Wiseacre

Wiseacre

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I know it's fun to talk about "waste, fraud, and abuse", but do you really think the entirety of the budget falls in those three categories? The reality is that if we keep taxes at the current level (and note, Republicans are calling for even more tax cuts), we'd have to make radical spending cuts to balance the budget.

Since 2010 is the most recent year I have a detailed breakdown easily available for, I'll use it to illustrate the point (if anything, it would require deeper cuts today due to more debt service). Assuming you're not going to default on the national debt, eliminating all non-defense discretionary spending and then cutting everything else by 15% would still result in a small deficit (about 55 billion). If you make the choice to fully fund Medicare, Social Security, and defense spending, you'd still need to zero-out non-defense spending while cutting unemployment benefits and Medicaid by 45%.


There were and still are a sizable number of TPer repubs who did not want to raise the debt ceiling. If we had gone down that road it would have been a disaster, and most of the rest of us know it. We believe that spending cuts are needed, but not all at once. I think if we came up with a bipartisan plan to do that over the next 10 years in a signifcant, meaningful way, that maybe a coalition of moderates from both parties could pass it through Congress like they did with the debt ceiling increase. But it's gotta include changes to entitlements, no ifs ands or buts. Those program are unsustainable, and must be reined in. I don't see why both parties couldn' claim credit for saving these programs for future generations by making them solvent. And in so doing, take a big step in making over their own image. And also BTW making entrepeneurs more comfortable witht he idea of building here and creating jobs.

On the revenue side, I think we could see a bipartisan agreement to overhaul the tax code and reduce or eliminate much of the loopholes, subsidies tax breaks, and deductions, with a corresponding drop in tax rates. But now is just not the time for raising more tax revenue, it disincentiviizes the very behavior you want to encourage. I wish more lib/dems understood that. Once you get the economy growing and unemployment is dropping, then you can talk about more revenue and trying to balance the budget. But I don't want to give Washington any more money until they show they can spend what they've already got more wisely and effectively. Right now, they ain't even close.
 
OP
Wiseacre

Wiseacre

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This whole "regulatory uncertainty" argument is even more bizarre because:

1. Future regulation is never certain, because Congress always has the power to change it.
2. If it were true, Australia (which with the implementation of cap-and-trade has far more uncertainty than we do) would be in a depression right now. Instead, their economy is booming.


Don't know nothing about Australia, don't care to either. What I do know is that over the past few years the amount of new regs and the associated costs of compliance has risen quite high here in the US. The trend is going the wrong way, and American businesses do't know what's coming next. Who the hell knows what regulators will do under Dodd/Frank, especially if Obama is re-elected.
 

Polk

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I know it's fun to talk about "waste, fraud, and abuse", but do you really think the entirety of the budget falls in those three categories? The reality is that if we keep taxes at the current level (and note, Republicans are calling for even more tax cuts), we'd have to make radical spending cuts to balance the budget.

Since 2010 is the most recent year I have a detailed breakdown easily available for, I'll use it to illustrate the point (if anything, it would require deeper cuts today due to more debt service). Assuming you're not going to default on the national debt, eliminating all non-defense discretionary spending and then cutting everything else by 15% would still result in a small deficit (about 55 billion). If you make the choice to fully fund Medicare, Social Security, and defense spending, you'd still need to zero-out non-defense spending while cutting unemployment benefits and Medicaid by 45%.


There were and still are a sizable number of TPer repubs who did not want to raise the debt ceiling. If we had gone down that road it would have been a disaster, and most of the rest of us know it. We believe that spending cuts are needed, but not all at once. I think if we came up with a bipartisan plan to do that over the next 10 years in a signifcant, meaningful way, that maybe a coalition of moderates from both parties could pass it through Congress like they did with the debt ceiling increase. But it's gotta include changes to entitlements, no ifs ands or buts. Those program are unsustainable, and must be reined in. I don't see why both parties couldn' claim credit for saving these programs for future generations by making them solvent. And in so doing, take a big step in making over their own image. And also BTW making entrepeneurs more comfortable witht he idea of building here and creating jobs.

On the revenue side, I think we could see a bipartisan agreement to overhaul the tax code and reduce or eliminate much of the loopholes, subsidies tax breaks, and deductions, with a corresponding drop in tax rates. But now is just not the time for raising more tax revenue, it disincentiviizes the very behavior you want to encourage. I wish more lib/dems understood that. Once you get the economy growing and unemployment is dropping, then you can talk about more revenue and trying to balance the budget. But I don't want to give Washington any more money until they show they can spend what they've already got more wisely and effectively. Right now, they ain't even close.

See, we agree on a fair amount of that. The nation needs deficit reduction over the longer-run and a big chunk needs to come from getting health care costs under control. I also don't think we should be looking at large-scale tax increases in the current environment. I think tax reform that closes holes and lowers rates is a good idea. The thing is, as much as we don't need raise taxes right now, that argument applies double for spending. Laying off public sector workers in a weak labor market is a terrible idea.
 

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