How Falling Off The Fiscal Cliff Impacts You
I’ll say it again, Democrats want to go off the fiscal cliff. : They’ll get their tax increases — $600 billion dollars worth— their revenue increases, and cuts to defense, which has been a goal of theirs for the past ten years. : Goodbye Bush tax cuts, Hello Obama tax hikes. : With the fledgling coalition of ‘cliff jumpers’ led by Sen. Patty Murray (D-WA), let’s see how the impact will affect us who aren’t on Capitol Hill.
According to Paul Katzeff at Investors Business Daily, he wrote on November 16 that ending the Bush tax cuts will also be detrimental to the middle class. : Contrary to popular belief, the Bush tax cuts has beneficial mechanisms, like credits for lower income households and reductions to the marriage penalty, all of which help the middle class. : While conservatives know this, it’s hard to break the deafening noise of the liberal media.
The typical American family will be hit with an extra $3,222 in taxes, the [Tax] Foundation says.: That’s based on a two-child family with median income of $74,563. The tax increase will amount to 4.32% of that family’s income.: The Foundation’s analysis compares that family’s tax bill in 2011 – the latest year that an AMT patch existed – to what it would be in 2013, assuming all Bush and Obama tax cuts expire, the AMT remains unfixed and the 2% payroll tax cut also expires.: The AMT keeps hitting more middle-income taxpayers because the standard deduction and certain itemized deductions such as state and local taxes do not reduce its bite. Also, its exemption does not grow automatically with inflation.
Families in high-individual-income states such as New Jersey would be hit hard by currently slated AMT changes. The AMT exemption level would revert to what it was 12 years ago: $45,000 for married joint filers vs. $74,450 in 2011. And credits such as the child tax credit would no longer be allowed to offset AMT liability.
But, contrary to political conventional wisdom, families in lower-income states, like Arkansas, would also take an outsized hit.: That’s because three tax cuts that everyone will lose – the cut in the child tax credit, end of the 10% bracket and reduced standard deduction for married filers – are fixed increases that do not hinge on income. As a percentage of income, those increases will be biggest for lower-income families.
New Jersey is set to take the largest blow, with a looming tax increase on the typical family totaling $6,933.
As more Republicans flee Grover Norquist, Founder of Americans for Tax Reform, and his anti-tax pledge — it’s a forgone conclusion that revenue increases will occur IF there is a deal. : However, Republicans should ask themselves why swallow such a demand when it’s been over 1300 days since the Democratic Congress has passed a budget. : It’s not logical or moral for Republicans to cave to the soulless, rotten liberal cadre of robbers this easily during the negotiations.
The only acceptable outcome, which I would still be unhappy with, is a deal that calls for at least eight dollars in spending cuts for every new dollar in revenues. : The ten-to-one deal is even more “palatable.” : I hate tax increases — but the outcome of the election will make it hard for conservatives to hold their ground. : Yes, the Tea Party Caucus was re-elected, with the exception of a couple of members, and Obama was re-elected by the 47% who don’t pay taxes, so there isn’t a mandate — but the clock is ticking.
Concerning revenue, Republicans should push to raise the rates on those making $500,000 or more. : I’m not a fan of Warren Buffett at all — but his plan to increase the rates on the incomes of those people is reasonable for now.
- First, he only calls for raising taxes on Americans earning more than $500,000 a year, not the $250,000 that President Obama is focused on. Families who earn $250,000 and live in major cities justifiably point out that this salary does not leave them feeling “rich.” So, raising the definition of rich would go a long way toward making these tax hikes more palatable.
- Next, he calls for a minimum 30% tax on Americans making $1 million to $10 million or more, regardless of how this income is generated. One of the most egregious elements of the tax code is that some of America’s highest earners pay much lower tax rates than average earners, because they generate their income from capital gains or dividends or have figured out how to shelter it by taking advantage of various loopholes. This tax would ensure that most income is treated the same way.
Americans living in urban areas, with rent and other utilities, see their $250,000 income dwindle rapidly, and don’t feel rich. : They’re right. : As George Will aptly noted, a Chicago school superintendent with twenty years experience, who is married to a police captain with twenty years experience is almost rich within the tax increase parameters of the Obama administration.
As I’ve said, I hate raising taxes, but we cannot be the party that is blamed for going off the cliff. : Democrats have planted their flag on the side of willingly going off. : That’s perverse, and wrong. : Let’s be the party that said NO! : We’re the part of no. : We don’t want to cut defense by the hundreds of billions. : We don’t want $600 billion in tax increases for the American taxpayer. : We have an opportunity to blunt the trauma of falling off the cliff.
However, I also understand the political ramifications if we do have a deal — and history hasn’t been to kind to us. : John Fund wrote today in National Review that:
many old Washington hands recall that Republicans agreed on tax-increase-for-spending-cuts deals in 1982 under Ronald Reagan and in 1990 under George H. W. Bush. These deals politically damaged the party in the short run, and they also proved to be bad policy. The 1982 budget deal, which promised seven dollars in spending cuts for every three dollars in tax increases, was never honored. Congress agreed to less than 27 cents in spending cuts for every dollar of tax increases, and President Reagan came to bitterly regret his decision to approve the deal. Ed Meese, Reagan’s senior counselor at the time and later his attorney general, recalls that the 1982 deal ‘was the worst domestic-policy mistake of the Reagan administration.’
So, this time Republicans must insist the cuts be enacted immediately. : Furthermore, I like the idea Sen. Jeff Sessions (R-AL) has concerning transparency if a deal is reached. : A week-long debate on any aspect of the bill, including amendments, edits, and revisions. : All will be televised on C-SPAN for the public to see — : if they don’t fall asleep first.
Yet, we cannot forget back when: “Treasury Secretary Timothy Geithner admitted [last February] in congressional testimony that the administration lacks a long-term plan to deal with the nation’s soaring $16 trillion debt. “We’re not coming before you today to say we have a definitive solution to that long-term problem,” he told House Budget Committee chairman Paul Ryan. ‘What we do know is, we don’t like yours.” : I’ll try to temper my cynicism, but being optimistic about government is difficult.
I hope for a deal, but, at the same time, will start cashing out my investments in the stock market in preparation for the day of reckoning.
Matt Vespa is a conservative blogger based in Virginia. Besides contributing to Right Wing News, Vespa writes for RedState, PJ Media, Independent Journal Review, and his personal blog Noodle Pundit. He's also the 2013 recipient of American for Prosperity Foundation's Andrew Breitbart Award For Excellence In Online Activism and Investigative Reporting