Category Archives: Taxes

We’ve averted the fiscal cliff – or have we?

Passed by the Senate at a 2 am vote on January 1, 2013; passed by the house at an 11 pm vote that same night; signed into law by the President on January 2, 2013, the American Taxpayer Relief Act of 2012 is perceived as a deal struck by congress at the eleventh hour that largely eliminated the Fiscal Cliff.

Has this legislation really averted the Fiscal Cliff?

The Fiscal Cliff is the sharp decline in the budget deficit that could have occurred beginning in 2013 due to increased taxes and reduced spending as required by previously enacted laws.

But the deal to avert the Fiscal Cliff doesn’t achieve any of that. Instead, it…

A) Does not reduce the Federal Government’s budget deficit

B) Does not avoid increased taxes

C) Does not reduce spending

A) The Fiscal Cliff deal does not reduce the budget deficit.

The Congressional Budget Office (CBO) estimates the legislation to avert the Fiscal Cliff will reduce revenues and increase spending, overall adding nearly $4.0 trillion to the Government deficits over the next 10 years.

B) The Fiscal Cliff deal does not avoid increased taxes.

As a result of the deal, the Tax Policy Center, a nonpartisan Washington research group, estimates that taxes on 77.1% of U.S. households are going up in 2013.

Among the households facing higher taxes, the average increase in taxes would be $1,635, the Tax Policy Center said.

  1. The two-year old 2% cut to payroll taxes is being allowed to expire. The payroll tax, which was reduced to 4.2% in 2011 and 2012, returns to 6.2% in 2013. This is expected to take about $120 billion out of the economy, which should have a negative impact of about 0.7% on GDP growth.
  2. Marginal income and capital gains tax rates are increased for those with annual income over $400,000 for individuals and $450,000 for couples. The top income rate is going up from 35% to 39.6%. The top capital gains rate increases from 15% to 20%.
  3. A phase-out of tax deductions and credits for incomes over $250,000 for individuals and $300,000 for couples is reinstated.
  4. Estate taxes are set at 40% of the value above $5,250,000, indexed for inflation, up from 35% of the value over $5,120,000.
  5. A 2.3% tax on gross sales of medical devices (such as heart valves and hip replacement parts – a tax firms making equipment must pay even if they have no profit at all.
  6. A new 3.8% surtax on investment income (possibly including profits from the sale of a home) for individuals making more than $200,000 a year or couples with $250,000 or more.
  7. An increase of Medicare tax on wages above $200,000 for individuals and $250,000 for couples.  The current 2.9% Medicare payroll tax will be increased to a total of 3.8%.
  8. A raise in the threshold for allowed Itemized Medical Deductions from 7.5% of adjusted gross income to 10%, burdening those with the largest medical expenses by limiting how much of these costs they can deduct on their taxes.

C) The Fiscal Cliff deal does not reduce Government spending.

The budget sequestration created by the Budget Control Act of 2011 (the directed automatic across-the-board cuts totaling $110 billion per year for 10 years beginning on January 2, 2013, split evenly ($55 billion each) between defense and non-defense discretionary spending) is delayed by two months.

The American Taxpayer Relief Act of 2012 does include, however, over $67 billion in tax breaks for ‘renewable energy’, Hollywood, multinational corporations, Puerto Rico and Virgin Islands rum industry, NASCAR, plug-in electric scooters and others.

60,000,000 equals 1,300

In 2011, General Motors (GM) has sold about 8,000 Chevy Volts – its electric car.

Chevy Volt

For each Volt sold – the Federal Government in 2011 has spent $7,500 in tax credits – a total of about $60 million.

Obama’s new budget calls for raising the federal tax credit to $10,000 for 2012.

Some states (such as Utah, Colorado, Maryland and others) are offering additional tax credits on top of the Federal tax credit, with Illinois topping them all with its own $7,500 tax credit.

Who is getting all these Government hand-outs?

“The Volt appeals to an affluent, progressive demographic,” (in other words: rich Liberal yuppies) says Bill Visnic, senior editor for Edmunds.com “It’s rare. It’s hard to get one. … It’s the same reason that people buy the really rare exotic cars: Because other people can’t have one.”

GM says the average income of Volt buyers is $175,000 a year.

But on March 2, 2012 GM has announced it will lay off 1,300 employees and halt production of Volt due to excessive supply and low demand.

To sum it up:

  • Government ads $60,000,000 to the nations’ debt
  • Government chooses who gets the perks – affluent progressive Liberals
  • 1,300 employees are out of work – a ‘return’ of $46,000 per laid-off employee

Who Are the Real ‘Occupy Wall Street’ People?

New York Magazine, no right-wing rag by any stretch, on October 2, 2011 published a poll of one hundred ‘Occupy Wall Street’ protesters it considers as ones who ‘are in it for the long haul’.  Here’s what they had to say about themselves and their ideas:

  • 37% of them said capitalism is inherently immoral.
  • They think the best countries in the world are Canada and Denmark.
  • They would fix Wall Street by burning it down, making Elizabeth Warren President and by passing a maximum-wage law.
  • 34% of them are convinced the U.S. government is no better than Al Qaeda.

New York Magazine 'Occupy Wall Street' poll

 

The sympathetic New York Magazine, in yet another poll of 50 ‘Occupy Wall Street’ protesters published on October 18, 2011, tried to find out how much do the protesters actually know about the economic system that they’re fighting to change, Wall Street, taxes, and government?

  • 72% of them did not know what the S.E.C. (Securities and Exchange Commission) is.
  • 90% of them did not know that the top marginal income tax rate is (currently 35%).
  • 84% of them did not know what is the Dodd–Frank Act (a financial regulations law passed and signed last summer).
  • To the question: What does the government spend more on? Health care and pensions, education, or the military? 94% of them said government spends more the military. Wrong!  The correct answer is ‘health care and pensions’, which accounted for 43 percent of government outlays in 2010. Defense accounted for 20 percent.
  • Given that current capital gains tax rate stands at 15 percent, protesters were asked what would they want the capital gains tax rate to be. 6% of them want to see a 100 percent capital gains tax rate. 58% of them want the capital gains tax rate to be between 25-80 percent.