After all
the chest thumping and foot stomping about the perils of the fiscal cliff,
Congress finally acted. The worst thing
about it was that the Republicans had to swallow a bitter pill crammed down
their throats by the victor in the White House.
Elections have consequences.
Nearly 3,000,000 conservatives stayed home on Election Day because they
couldn’t vote for a Muslim or a Mormon.
What Obama calls a mandate was merely a series of very close wins in
those few ‘key states’ that were the main target of a gazillion dollars in
pre-election advertising. The majority
of the country would barely have known who the candidates were, had they waited
for political ads to tell them. So we
have roughly three million people to thank for the new taxes, regulation, and
growing deficit.
Having said
that, Obama DID win and he DID stand fast on his demands, so he now owns the
economy LOCK, STOCK AND BARREL (smiling as I use a gun analogy.)
But a review
of the deal Congress bought off on is not totally a ‘bend over and grabb’em’
package.
For one
thing, and this really matters: The
fiscal cliff deal PERMANENTLY extended
nearly all the tax cuts enacted from 2001 to 2010. (a/k/a ‘the Bush tax cuts'). Dicking
around with these tax cuts had become a bienniel Congressional circus, and was no small reason that small businesses didn’t know
whether to fish or cut bait. By making
these permanent, it means – AND THIS IS IMPORTANT – it mean that CONGRESS WILL
HAVE TO DO SOMETHING TO CHANGE THEM!
Extending the tax cuts had been almost automatic but Congress could
modify this and change that. Now they
will have to actually CREATE LEGISLATION TO RAISE THOSE TAXES and everyone will
have to go on the record yea or nay. So
we didn’t really fare so badly on that aspect of the deal.
Another key provision in the fiscal cliff deal made PERMANENT
the Alternative Minimum Tax “patch” that until now has been extended only one
year at a time. The
AMT was created in 1969 to make sure the uber-rich didn't dodge the tax bullet. But what defined uber-rich in 1969, has never
been adjusted for inflation. That means what made you affluent back then
doesn't now, but you're still taxed like it does.
Consider a
family with a gross income of $75,000 in 1969.
Under the regular IRS rules, you start with $75,000 and subtract
deductions like state taxes you paid, and exemptions like child credits,
mortgage interest, etc. Eventually, you arrive at your taxable income. You look up
your taxes in the handy chart and it says you pay $1000 in income taxes.
Then you
check the AMT chart. Since you are
uber-rich (by IRS definitions) there is a minimum tax you have to pay,
regardless of your deductions. THAT
chart says a family making $75K will pay $2500 MINIMUM. PERIOD. So your tax obligation is the greater of the two numbers - in this case, $2500.
Considering
inflation, that same $75K is no longer considered RICH, let alone uber-rich,
but you have been being taxed as if it is uber-rich. The AMT is now ‘fixed’, meaning it won’t have
to be extended or ‘fixed’ every year.
This will also add a modicum of stability to businesses when they try to
look down the road at what the government will be taking from them. Uncertainty is NOT the friend of job
creation. This fix of the AMT should
help a little. Additionally, it will keep about 28 million households off the
AMT in 2013 alone. The deal extends for five years some refundable tax
credits that were intended as temporary stimulus in 2009 and 2010.
There are a few exceptions to this
largess. Individuals with taxable income of $400,000 and couples making
$450,000 or more will again pay the Clinton-era top rate of 39.6 percent on
ordinary income. (ugh) They’ll also pay a 20 percent rate on capital gains and
dividends, up from 15 percent. On top of that,
high-income households will pay another 3.8 percent tax on investment income
starting this year under the 2010 health reform law. (Remember, the ACA
that Obama said was NOT a tax but Chief Justice John Roberts said WAS a tax,
hence it WAS constitutional? Hello.)
Individuals making $250,000-plus and
couples making $300,000 or more will also once again face limits on their
personal exemptions (PEP) and itemized deductions.
Sadly, all
workers will lose the temporary 2 percentage point payroll tax cut that was
first enacted as part of the 2010 stimulus.
While this bites into the bottom line in your paycheck, it IS the only
funding for Social Security, and with about 10,000 boomers retiring EACH DAY,
the system can scarce afford a funding holiday.
Just look at this as a little investment in your own retirement – and smile. Uncle Sam swears that SS will be there for
YOU!
Finally,
this deal takes one very important step. After more than a decade where nearly
the entire tax code was temporary, Congress made most of the law permanent.
Again – the impact
of this step means that if the government (the liberals and Obama) want to
raise revenue (Ed. Note: didn’t you just
frigging love it back under Clinton when they stopped calling raising taxes
RAISING TAXES and called it RAISING REVENUE‼!) ….. where was I? OH – if Congress wants more revenue to
redistribute, they will actually have to do their JOBS and ENACT
LEGISLATION! What a concept! Write a law to take more of our money AND
VOTE ON IT! If it passes Congress, the President will then have
to SIGN IT. Put your signature on the
law, Mr. President, and OWN IT!
Um. Banning your gun analogy.
ReplyDeleteBOOM.
Wait. Whoops?
Very informative and utterly depressing at the same time. I need a stiff... drink. ;)
ReplyDeleteA 'stiff one' works for me, too!
Delete