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Fiscal Cliff and Taxmageddon: They’re Coming

“Taxmageddon” is coming on January 1, 2013. What does that mean? Well, we (US taxpayers) can expect large tax increases. Romina Boccia, James Sherk and Katie Tubb of the Roe Institute at The Heritage Foundation, say:

“The nation is now firmly on track to go over the fiscal cliff in January 2013 unless Washington takes action. The uncertainty leading up to the fiscal cliff – especially Taxmageddon – is already hurting the economy today and, according to projections by the Congressional Budget Office, could send the country back into recession in 2013.”

So, just what is “Taxmageddon?” It is a massive tax increase of $494 billion over what we already pay, the largest tax increase ever! And that’s on top of the $502 billion ObamaCare tax, er, mandate, er, tax coming over the next ten years. The average US household will see a tax increase of $3800 in 2013 alone, with higher tax bites in subsequent years. I’ll never understand how having less to spend will have no effect on the US economy, but, hey, Obama’s economic team, his Council of Economic Advisers (CEA), has known what’s best, in spite of being wrong every time. According to the most recent CEA report:

“… the economy posted its thirteenth straight quarter of positive growth, as real GDP (the total amount of goods and services produced in the country) grew at a 2.0 percent annual rate in the third quarter of this year, according to the ‘advance’ estimate released by the Bureau of Economic Analysis. Over the last thirteen quarters, the economy has expanded by 7.2 percent overall,….”

“Growth” and “expansion” are not the same thing. Other than to make President (for life?) Barack Hussein Obama’s economic policies look good, why were the two (completely different) concepts included? Further, nowhere in the CEA report can I find an explanation of what an “advance estimate” is, or that the advance estimate is typically adjusted downward as complete information becomes available.

Sixty percent of the so-called Bush Tax Cuts went to middle and low income taxpayers (the 52 percent still paying income tax), therefore they will bear the majority of the burden. So much for Obama’s promise to not raise taxes on anyone making under $250,000.

Because of the threat of higher taxes, many businesses are currently making preparations by slowing or stopping job creation. Because Taxmageddon will slow job creation and wage growth, Americans of all income levels will bear the brunt of Taxmageddon. But, hey, Obama’s economic team has everything under control.

Boccia’s, Sherk’s, and Tubb’s recommendation: “Congress and the President should show principled leadership by avoiding tax hikes on all Americans and by offsetting defense sequestration with cuts in spending elsewhere.” Will that recommendation be followed? I doubt it. Obama says he will not sign a “fiscal cliff avoidance deal” unless it calls for tax increases.

What are the consequences of these tax increases? No one knows for certain, but the experiences of two countries, Great Britain and France, can provide some idea of what can happen in the US. After all, rich is rich.

  • France: from rt.com, we get this: “The government’s plan to raise the top income tax rate to 75 percent has already sparked rumors in the media that France’s wealthiest people could leave the country to avoid taxes…”  [emphasis mine]   Also, “… while the business community has also criticized a proposal in the 2013 budget to raise the capital gains tax on equity sales, which they argue will scare away investors and hamper entrepreneurs from developing their businesses.” 
  • Great Britain: from Red Alert Politics, we get this: “After sticking it to the rich by pushing top tax rates from 40 percent to 50 percent in 2010, Britain lost two-thirds of its millionaires and £7 billion in tax revenue.” Red Alert Politics continues, “… there was ‘considerable behavioral response’ to the tax increase, the report details how the tax hike stunted economic growth, caused substantial (legal) tax avoidance, and likely made the UK ‘a less attractive place to start, finance and grow a business’.”

Can Obama and his minions learn anything from France and Great Britain? Do people who pay taxes leaving France, and the admission by Great Britain’s own government that raising top income tax rates actually reduced revenue and hurt economic growth mean anything? Apparently not. Obama’s ideology of “fairness” and “social/economic justice” trumps economic reality.

About

  • Clavos

    Did anyone say anything about discouraging people from voting? Perhaps in that special, unique comment thread inside your head, Glenn?

  • Dr Dreadful

    If you take out that last non sequitur sentence, Glenn does actually hit a very ironic nail right on the head here, Clav.

    (And yes, I chose every word in that second clause very carefully!)

  • Igor

    @96-Deano: good comment, very astute.

  • Clavos

    (And yes, I chose every word in that second clause very carefully!)

    Please, Doc, ya didn’t have to draw me a picture.

    Just sayin’

    Sigh.

  • Dr Dreadful

    Preemptive strike, Clav…

  • Glenn Contrarian

    Clav –

    Did anyone say anything about discouraging people from voting? Perhaps in that special, unique comment thread inside your head, Glenn?

    It’s interesting that a politically-aware conservative from Florida should have to ask that question, especially considering what happened with the voting lines this past election….

  • Clavos

    I’m well aware of what is alleged about the lines in Florida, and in fact, as a member of moveon.org (betcha never woulda guessed that, eh Glenn?), I was asked to and did sign a petition to Ricky Scott to do something about the early voting meltdown. I even posted a poster about it from moveon on Fb.

    So what’s your point? We weren’t discussing that before now was my point.

  • Glenn Contrarian

    *after being digitally slapped silly, mumbles* “um, no, I didn’t see that coming at all” *then sheepishly crawls under the keyboard*

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Dreadful

    You’re in danger of getting lung cancer, Glenn, what with all the things you’ve literally and figuratively been told to put in your pipe and smoke today…

  • Clavos

    For Glenn, Jet et alia.
    So much for your vaunted 91% tax rate.

    An excerpt:

    …the top marginal income-tax rate in the 1950s was much higher than today’s top rate of 35%, but the share of income paid by the wealthiest Americans has essentially remained flat since then.

    In 1958, the top 3% of taxpayers earned 14.7% of all adjusted gross income and paid 29.2% of all federal income taxes. In 2010, the top 3% earned 27.2% of adjusted gross income and their share of all federal taxes rose proportionally, to 51%.

    So if the top marginal tax rate has fallen to 35% from 91%, how in the world has the tax burden on the wealthy remained roughly the same? Two factors are responsible. Lower- and middle-income workers now bear a significantly lighter burden than in the past. And the confiscatory top marginal rates of the 1950s were essentially symbolic, very few actually paid them. In reality the vast majority of top earners faced lower effective rates than they do today.

  • Glenn Contrarian

    Doc –

    You’re in danger of getting lung cancer, Glenn, what with all the things you’ve literally and figuratively been told to put in your pipe and smoke today…

    Yes, time was here in Washington state we could get Twinkies but no marijuana, but now we can get marijuana but no Twinkies.

    And thanks to you (and Clavos) for the criticism – I do need it and appreciate it.

  • Glenn Contrarian

    Clavos –

    But the question is, can you show us a time when a measly 4.5% hike in tax rates resulted in financial ruin? I’ve pointed out twice when we had higher tax rates, and both of those times (one of which was not so long ago) we had a national boom.

    And according to nationalmemo.com/suddenly-americas-top-corporate-leaders-are-shunning-tea-party-extremism/ (the software filter wouldn’t let me post it as a hyperlink) it’s not just us liberals pointing this out:

    - Fred Smith, CEO of Federal Express and a former economic advisor to Senator John McCain…denounced as “mythology” the notion that raising the top rate would damage the U.S. economy.

    - Randall Stephenson, chief executive of AT&T, the nation’s largest telecom company, told Business Week that higher taxes and more revenue must be part of any budget agreement.

    - So did Lloyd Blankfein, the CEO of Goldman Sachs.

    - And so did a group of defense industry executives from companies such as United Technologies, RTI International, and Northrop Grumman.

    - David Langstaff, the CEO of TASC, at a Washington press event organized by the Aerospace Industries Association, a defense lobby, said income tax rates “need to go up some…. This is a fairness issue – there needs to be recognition that we’re not collecting enough revenue. In the last decade we’ve fought two wars without raising taxes. So I think it does need to go up.”

    Clavos, I know you may feel it’s not fair that the rich pay more taxes…but it is also not right and not fair that so many of the rich pay a lower percentage of their income than you or I do. It is not right that Romney paid only 13.9% taxes – capital gains income tax is not taxing the same money multiple times, it’s taxing the interest made on that money, the profits made on that investment.

    It is not right that the Republicans should demand that the lower classes – the ones who are least able to afford to pay a 35% tax rate – should be expected to pay that rate while defending 15% tax rates on capital gains income.

    And when it comes to fairness, while it may not be fair that Joe Millionaire has to pay a few percent more, he’s still a millionaire, and his kids can still get the best health care, go to the best colleges and be able to start out much higher on the corporate rung, whereas Miss Wal-Mart Check-Out Lady would happily pay that extra few percent if she were a millionaire, too. But instead, she worries about feeding her kids, making sure they have clothes to eat and a dry place to sleep. Making sure they go to the very best colleges and starting out high up on the corporate rung is a very, very distant dream.

    It’s like the CEO of FedEx and former McCain economic adviser said: it’s simply “mythology” that raising the top tax rate would damage the nation’s economy.

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  • Igor

    The rich in America have failed by their own standards.

    For years they’ve been telling us that they are the “job creators” and so they need more money and power in their hands. But that is exactly what the Bush administration did and the Rich failed to produce jobs.

    Therefore, we must revoke the big tax breaks to the rich, as well as any bailouts.

  • Clavos

    The thing is, you guys; if we took ALL the money ALL the rich own we wouldn’t even begin to pay off the country’s debt; this “tax the rich” thing is a strawman. That’s why it bothers me that that man is targeting and focusing on the rich; I sincerely believe he’s trying to create a large schism in the american population; to what end, I don’t know, but nothing good comes to mind.

  • Glenn Contrarian

    Clavos –

    The key isn’t to get the rich to pay off the nation’s debt – it’s to get them to pump their income back into their companies rather than socking their profits into the bank or taking them offshore. When given a choice of whether to pay the taxes or putting those profits back into the company, they’ll almost always choose the latter…and that’s a good thing for everyone, don’t you think?

    And if it were such a bad idea, I really don’t think the CEO’s above would have spoken out in favor of it.

    To address your point about the country’s debt, no, we’re not trying to use their money to pay off the debt and you know it – that’s a strawman of your own. We’re trying to either get them to use their money to grow their companies (and therefore not pay their taxes), or they can pay their taxes and we can help rebuild our infrastructure. How can this possibly be a bad thing?

  • Igor

    Glenn is right: raising rich peoples taxes will drive money out of their mattresses and into the economy, where it will do some good.

  • Clavos

    When given a choice of whether to pay the taxes or putting those profits back into the company, they’ll almost always choose the latter…

    True as far as you stated it, but you oversimplified it by leaving out their third choice of avoiding paying the taxes AND keeping possession of their money.

  • Dr Dreadful

    I sincerely believe he’s trying to create a large schism in the american population

    Then perhaps someone should tell him there already is one.

  • Glenn Contrarian

    Clavos –

    They can only do so by (1) finding enough deductions that they won’t have to pay, or (2) taking their money outside the country, or (3) engaging in tax fraud.

    If they do the first, then that’s good, too. Our history in the 1950′s-1970′s and the 1990′s shows that not enough will do the second to really matter (because our tax revenues did not fall when the taxes were raised), and those who do the third care more about a few more cents on the dollar than about not committing felonies and doing jail time.

    Your turn.

  • Igor

    American companies are using tricks to cause an enormous loss of corporate taxes to foreign countries. Usually this is a simple scheme that routes profits through a wholly owned shell in a foreign country so that taxes there fall under the Foreign Tax Allowance (FTA). Through that simple device Chevron, Exxon and Valero have reduced their US corp taxes to zero. An announcement over the weekend revealed that Google has saved $2billion on US taxes last year with that trick.

    That’s a loophole worth closing, but Boehner and McConnel and Paul Ryan will not close that loophole.

    The huge bribes that large american companies have paid to politicians in the form of “campaign contributions” has paid off handsomely for those companies.

    But it will destroy the USA by undermining it’s finances.

    Over the weekend the US BLM was busy auctioning off leases for shale oil lands in California, which will be another tax boon for Big Oil because California (alone among oil jurisdictions) charges NO extraction tax for oil.

    While phony patriots in the republican party purposely look the other way, the USA is being robbed blind thru the cooperation of foreign governments and our over-privileged corporations.

  • Clavos

    Then perhaps someone should tell him there already is one.

    True. And mostly generated (or at least exacerbated) by the present administration…

    because our tax revenues did not fall when the taxes were raised…

    Nor did they rise commensurate with the increases…

  • Dr Dreadful

    True. And mostly generated (or at least exacerbated) by the present administration…

    No, mostly generated by money. The widening chasm between rich and poor is nothing new: it’s been a major political issue for at least the last 20 years.

  • clavos

    The widening chasm between rich and poor is nothing new: it’s been a major political issue for at least the last 20 years.

    And Obama has been assiduously stoking the fires his entire time in office…

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Dreadful

    And Obama has been assiduously stoking the fires his entire time in office…

    Good.

  • Zingzing

    I was just thinking about directing clavos to Mel brooks’ “French revolution” bit of history of the world pt 1, but then I thought about the conditions that spurred the American revolution… When you see all the power and money shifting towards one class, you’d better get a little nervous either way. Clavos seems worried that the majority of this country is bitching too much, and he should be.

  • clavos

    Clavos seems worried that the majority of this country is bitching too much, and he should be.

    I agree, but obviously for entirely different reasons. I could say my concern is that this country, which appears at this time to be extraordinarily fragile and and in ill health fiscally and psychologically, is in danger of being rent asunder irreparably, but if that were to actually happen, it would probably be a good thing for the rest of the world.

  • troll

    so…when the rebels get close to D.C. do you think Obama will use his chemical weapons?

  • Doug Hunter

    Zing, while the shift to global corporations and the astronomical salaries and wealth of their heads and owners certainly creates imbalance, the numbers hide much of reality.

    No attempt is made to quantify government benefits, which have grown immensely, as part of wealth. A person with ‘zero’ net worth in this country has a guaranteed SS pension, disability insurance, low income insurance that provides medical care and food stamps if he is unable to pay, and the list goes far beyond that. I haven’t put a pencil to it, but that has to be worth quite a bit.

    I’m not disputing your point, just pointing out a major flaw in our measurement system that everyone seems to simply ignore… one of the reasons people don’t accumulate personal wealth for a rainy day is because the government does that for them.

  • Doug Hunter

    #128

    Haha, fat ass lazy americans aren’t gonna peel their eyes off the screen of a smartphone/tablet/computer long enough to do shit. This country is far, far from revolution. Getting nookie in some tent on Wall Street between college classes so you can have some ‘experience’ to tweet about your way to get a student loan from the company you just protested is far from a revolution.

    Revolutions require fighters… ha. Our kids our taught absolute fear and avoidance of physical violence at all costs, that government should have the sole monopoly on force, starting in preschool. The boys are feminized to where those that don’t end up gay can’t even have the sperm count to produce children. If you resist in any way you’re labeled defective and drugged into submission. (you’ll notice the military focuses on rough areas where education is weak to get it’s warriors) We’re trained to be ants in a colony and that’s what we’ll be, ants don’t attack the queen or the drones or question why they are over them, ants just gather resources for the greater good, a living sacrifice for the colony.

  • Cindy

    Yeah, more violence and tough guy stuff is what’s needed. Fuck you, Gandhi! What do you know about revolution? And fuck your peace and love bullshit too, Jesus. We need real men who like to pick veins from their teeth.

    (Hmmm…I wonder if Gandhi was gay?)

  • Cindy

    The boys are feminized to where those that don’t end up gay can’t even have the sperm count to produce children.

    And fuck women, who the hell would want to act like them? Damn pussies. Well, they are good for some things though.

  • http://www.squidoo.com/lensmasters/IanMayfield Dr Dreadful

    I’ll be glad when this Mayan nonsense is over so that we can go back to adding the suffix -gate to everything instead of -mageddon.