How far over the 'fiscal cliff' could they go?
WASHINGTON (AP) - The dealmakers who warn that a year-end plunge off the "fiscal cliff" would be disastrous don't seem to be rushing to stop it. Why aren't they panicking?
For one thing, the Dec. 31 deadline is more flexible than it sounds. Like all skilled procrastinators, from kids putting off homework to taxpayers who file late, Washington negotiators know they can finagle more time if they need it.
That doesn't mean delay would be cost-free. Stock markets might tank if 2013 dawns without a deal. But Americans could be temporarily spared many of the other ill effects if Congress and President Barack Obama blow past their deadline.
The Obama administration would have power to delay some of the tax increases and spending cuts that would officially take effect as January begins. Then, if an agreement is reached early in the year, it could be applied retroactively to wipe them out.
Some lawmakers even argue that briefly going over the cliff is the best way to force a compromise. The Obama administration on Wednesday indicated it would take the plunge if necessary to ensure that the wealthy end up paying higher tax rates.
Pushing the deadline too far is a risky strategy, however. The Congressional Budget Office predicts that the fiscal cliff policies, if left unchecked, would spark a recession later in 2013 and send the unemployment rate above 9 percent by fall.
How long could negotiators balk and bicker before putting the U.S. economy in jeopardy? The calendar becomes less and less forgiving as the weeks pass.
A procrastinator's guide to pushing the deadline:
December
Democrats led by Obama and Republicans led by House Speaker John Boehner say it's critical to reach a deal this month. Yet both sides appear dug in over taxes. And their two plans are far apart on how much to cut spending while the economy is still recovering from the last recession.
So far, Boehner said, "we're nowhere."
If compromise were easy for this bunch, they wouldn't be in this jam. A good chunk of the fiscal cliff - the automatic spending cuts known as the "sequester" - is an artificial deadline created by Congress in hopes of forcing itself to come up with a deficit-cutting plan. It arrives at the same time as the expiration of the George W. Bush-era income tax cuts and other temporary tax breaks scheduled to end unless Congress extends them. Together the taxes and cuts would equal close to $700 billion in deficit reduction over 2013.
Congress could vote to override all this and essentially freeze taxes and spending where they are now while the economy heals. But Obama and lawmakers, especially Republicans bent on budget-cutting, see the fiscal cliff as the critical moment to overcome inertia on the nation's long-term debt crisis.
January
If there's no deal in December, the economy won't fall off a cliff on New Year's Day. But it probably will begin a bumpy downhill ride.
The new Congress that convenes Jan. 3 won't look much different from the one that's deadlocked now, divided between a Republican-controlled House and a Democratic-dominated Senate. The lawmakers would feel more heat, however.
Higher taxes for nearly everyone and across-the-board spending cuts would already be law.
"People will get more nervous day by day," said Mark Zandi, chief economist at Moody's Analytics. Still, he thinks the economy could weather a few more weeks of uncertainty as long as negotiators appeared to be working toward an agreement.
If the Bush-era tax cuts expired, that would raise income taxes for the average middle-class family by $2,200 over the course of 2013, the White House says. That's about $42 per week, probably not enough to curtail spending right away and deal an immediate blow to the economy, economists say.
Plus, taxpayers might never have to ante up. The Treasury Department sets withholding tables that determine how much tax comes out of Americans' paychecks. It could hold off raising the withholding if a deal seems to be in the works, said Roberton Williams, a senior fellow of the private Tax Policy Center.
Both Republicans and Democrats say they don't want middle-class taxpayers to pay higher tax rates. They disagree over whether to let tax rates rise on individual income above $200,000, as Obama wants.
Other far-reaching tax changes are more likely to go ahead in January. For example, although Obama proposes extending the temporary Social Security payroll tax reduction, support for that has been weak. So more money might start coming out of workers' pay, whether or not a fiscal cliff deal is reached. That's another $1,000 over the year, or a little more than $19 per week, from a worker making $50,000.
As for the sequester, the White House can direct the Pentagon and federal agencies to husband their resources for a while and hold off on some spending cuts while negotiations continue.
"The more there's an anticipation that there's actually an agreement in the works, the less of an impact any of this should have," said Chad Stone, chief economist for the liberal Center on Budget and Policy Priorities. He argues that it's OK to miss the fiscal cliff deadline if necessary to achieve a well-designed agreement.
February
What might finally get procrastinators moving if nothing else has? Fear of the United States defaulting on its debts for the first time ever.
Unless Congress acts, the government is expected to hit its legal borrowing limit of $16.39 trillion by the end of December. Treasury Department maneuvers should hold off a default for a couple more months, until late February or early March, private economists say.
Congress could raise the debt limit anytime now, if lawmakers agreed, before resolving the fiscal cliff. But it's being discussed as part of the bigger tax-and-spending package. The White House says raising the debt limit must be included in the deal; Boehner says the Republicans want any increase in the government's borrowing to be matched by spending cuts.
Remember the last debt limit showdown? The government came within a whisker of default in August 2011 before a compromise was reached. The financial markets reeled. Standard & Poor's downgraded the nation's credit rating.
Again coming to the edge of default - an economic crisis that scares investors more than the fiscal cliff - would probably send markets plummeting and finally shake up lawmakers, too.
"That's a pretty scary thing to watch," Zandi said. "For a policymaker that's real motivation."
For one thing, the Dec. 31 deadline is more flexible than it sounds. Like all skilled procrastinators, from kids putting off homework to taxpayers who file late, Washington negotiators know they can finagle more time if they need it.
That doesn't mean delay would be cost-free. Stock markets might tank if 2013 dawns without a deal. But Americans could be temporarily spared many of the other ill effects if Congress and President Barack Obama blow past their deadline.
The Obama administration would have power to delay some of the tax increases and spending cuts that would officially take effect as January begins. Then, if an agreement is reached early in the year, it could be applied retroactively to wipe them out.
Some lawmakers even argue that briefly going over the cliff is the best way to force a compromise. The Obama administration on Wednesday indicated it would take the plunge if necessary to ensure that the wealthy end up paying higher tax rates.
Pushing the deadline too far is a risky strategy, however. The Congressional Budget Office predicts that the fiscal cliff policies, if left unchecked, would spark a recession later in 2013 and send the unemployment rate above 9 percent by fall.
How long could negotiators balk and bicker before putting the U.S. economy in jeopardy? The calendar becomes less and less forgiving as the weeks pass.
A procrastinator's guide to pushing the deadline:
December
Democrats led by Obama and Republicans led by House Speaker John Boehner say it's critical to reach a deal this month. Yet both sides appear dug in over taxes. And their two plans are far apart on how much to cut spending while the economy is still recovering from the last recession.
So far, Boehner said, "we're nowhere."
If compromise were easy for this bunch, they wouldn't be in this jam. A good chunk of the fiscal cliff - the automatic spending cuts known as the "sequester" - is an artificial deadline created by Congress in hopes of forcing itself to come up with a deficit-cutting plan. It arrives at the same time as the expiration of the George W. Bush-era income tax cuts and other temporary tax breaks scheduled to end unless Congress extends them. Together the taxes and cuts would equal close to $700 billion in deficit reduction over 2013.
Congress could vote to override all this and essentially freeze taxes and spending where they are now while the economy heals. But Obama and lawmakers, especially Republicans bent on budget-cutting, see the fiscal cliff as the critical moment to overcome inertia on the nation's long-term debt crisis.
January
If there's no deal in December, the economy won't fall off a cliff on New Year's Day. But it probably will begin a bumpy downhill ride.
The new Congress that convenes Jan. 3 won't look much different from the one that's deadlocked now, divided between a Republican-controlled House and a Democratic-dominated Senate. The lawmakers would feel more heat, however.
Higher taxes for nearly everyone and across-the-board spending cuts would already be law.
"People will get more nervous day by day," said Mark Zandi, chief economist at Moody's Analytics. Still, he thinks the economy could weather a few more weeks of uncertainty as long as negotiators appeared to be working toward an agreement.
If the Bush-era tax cuts expired, that would raise income taxes for the average middle-class family by $2,200 over the course of 2013, the White House says. That's about $42 per week, probably not enough to curtail spending right away and deal an immediate blow to the economy, economists say.
Plus, taxpayers might never have to ante up. The Treasury Department sets withholding tables that determine how much tax comes out of Americans' paychecks. It could hold off raising the withholding if a deal seems to be in the works, said Roberton Williams, a senior fellow of the private Tax Policy Center.
Both Republicans and Democrats say they don't want middle-class taxpayers to pay higher tax rates. They disagree over whether to let tax rates rise on individual income above $200,000, as Obama wants.
Other far-reaching tax changes are more likely to go ahead in January. For example, although Obama proposes extending the temporary Social Security payroll tax reduction, support for that has been weak. So more money might start coming out of workers' pay, whether or not a fiscal cliff deal is reached. That's another $1,000 over the year, or a little more than $19 per week, from a worker making $50,000.
As for the sequester, the White House can direct the Pentagon and federal agencies to husband their resources for a while and hold off on some spending cuts while negotiations continue.
"The more there's an anticipation that there's actually an agreement in the works, the less of an impact any of this should have," said Chad Stone, chief economist for the liberal Center on Budget and Policy Priorities. He argues that it's OK to miss the fiscal cliff deadline if necessary to achieve a well-designed agreement.
February
What might finally get procrastinators moving if nothing else has? Fear of the United States defaulting on its debts for the first time ever.
Unless Congress acts, the government is expected to hit its legal borrowing limit of $16.39 trillion by the end of December. Treasury Department maneuvers should hold off a default for a couple more months, until late February or early March, private economists say.
Congress could raise the debt limit anytime now, if lawmakers agreed, before resolving the fiscal cliff. But it's being discussed as part of the bigger tax-and-spending package. The White House says raising the debt limit must be included in the deal; Boehner says the Republicans want any increase in the government's borrowing to be matched by spending cuts.
Remember the last debt limit showdown? The government came within a whisker of default in August 2011 before a compromise was reached. The financial markets reeled. Standard & Poor's downgraded the nation's credit rating.
Again coming to the edge of default - an economic crisis that scares investors more than the fiscal cliff - would probably send markets plummeting and finally shake up lawmakers, too.
"That's a pretty scary thing to watch," Zandi said. "For a policymaker that's real motivation."
It's not a cliff. All it is is 800 billion in SPENDING. Dems want to get it from the rich Reps want to get it from "loopholes". Either way if they did not spend an extra 800 billion then they would not need the extra revenue. Its a spending problem not a tax problem. Why people don't understand that is beyond me.
The expiration of all the tax cuts and immediate cuts to the agreed areas from last time will restore the Clinton taxes on everyone... sure it will hurt the middle class hard but we are more resilient than the top 1% because we are the ones supporting them! ... So let them go ahead and default the increased taxes and mandatory cuts across the board will still hit the rich in the wallet some!
I have a job that pays me a good wage and offers good benefits as long as I spend for my income level... I don't own a new car I own two old ones and fix them myself, I don't spend on my credit card what I do not have in the bank to pay at the end of the month... I don't buy expensive name brand anything and only buy what I absolutely need, I would like to buy a 60" LED TV but I do not NEED IT, I want to have a bigger place I don't need it! ... The problem does lead to spending ... if you spend more than you got you go into debt. The problem is the people who feel so impulse to one up their neighbor... ie...he has a boat I need a bigger boat... they have a Mercedes I want a one too, they have children I want to have children too totally dismissing that they cannot afford it!
We have an ever growing surplus of morons and idiots who think they should have a house, high class items, jewelry etc. ...all while working by doing the minimalist amount of effort to get it.... I have had to fire two people in the last two months because I hired them to do a job and they slacked off and did not do the job they were brought on to do even after I told them things were not acceptable!Â
Things are unequal in the working classes but darn those of us in the working middle class that don't pull in large sums of money live within our means and are hurting in times like these, but we are surviving ... but there are no shortage of some folks that are either too stupid because they did not pay attention in class, too fat from not watching what they ate that now have health problems because of it or better yet get disability for something that would not have happened if they lived healthier and exercised, people who fake the benefit systems saying they cannot work when they are and taking away money who really cannot work!
My wife and I both work right now she is helping her family with sending them 40% of her money every month (she has only made ~15k this year) and she wants to go on a trip this spring so she is saving what she has left for that and contributing to our house fund. It is dream of hers to go where she is going but I cannot go with her for the whole thing as I need to work but I will be along with her for some of it! We both are keeping our spending tightly controlled and you know what we are saving money even when there is very little to spare, even if it is only $100 a week from me and $200 from her once a month we are investing that money and making it work for us getting better returns from the bonds we are in than it would be in the bank with the dismal interest rates that exist now. We both want a house and know what we have to do to get it and if that means we have to live where we are and save for as long as it takes for us to buy what we want for ourselves then so be it! We just managed to cut another $120 of wasteful spending this last week - and I found another $165 that we will be getting back at the end of this month - now that is a Christmas present! - that saved money just like when I got a refinance of my home loan before the economy started going bust all went into investments and emergency funds | we have had to touch that money the last few months but the funds lasted long enough for us to find the solution to our current problems and plug the leak - now our savings will again be going up - slow and steadily if we don't go and over indulge... to stem that urge right now our one treat to ourselves is we go out once a month and have a nice dinner somewhere.
The American Dream is not dead but certainly the desire of some folks to work hard and press forward towards a goal is, they would rather charge it and get everything now regardless if they can afford it! .. Or better yet get it given to them because they feel entitled to it! ... There are people who are truly hurting now but there are also people who are hurting now that don't have to be if they would be smarter with what they got!
@Freespeech You stated very well how i feel. . .and i'm sure many readers here can relate. We also work and have historically not spent what we do not have. we save our money even just $25 a pay period because it adds up and allows us to pay for the unexpected with cash.  We do not have to "treat" ourselves to feel good. I can do my own pedicure and do not need to go to Walmart for this luxury. our Christmas presents are simple and inexpensive . . .Many of the 47% also do likewise I'm sure. But the bad apples in thr 47% ruin it for the rest.
"How far over the 'fiscal cliff' could they go?"
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Not far at all. If they did nothing at all it would cost an average of $4 pr day in additional with-holdings. But Wall St types want your SSI and medicare privatized and thats what their going to get because they will have you believe that this $4 is going to destroy the stock market and you are lead to believe it by your bought off representation in DC.Â
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If they had ever been interested in representing US citizens, they would have warned about housing bubbles and credit bubbles.
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Citi Bank just announced 11,000 layoffs and shareholders were cheering the move. We should nationalize Citi because we bailed them out not once but twice and their shareholders need to know what its like to have their money transferred to someone else.
 @T_BONE_WALKER Not sure about nationalizing Citi, but I DO like the idea that any company that gets a bailout cannot have any officer or board member earn more in total compensation than an upper level civil servant does. I also like the idea that if the house and senate do not pass into law a balanced budget, their salary goes to zero, and ALL federal employees get an automatic pay-cut large enough to balance it. THAT would motivate them.
@T_BONE_WALKER I almost never agree with you -- GREAT POST and your facts on the real costs are spot on. For Social Security specifically if you ended the salary cap for high wage earners OR increased the withholding by just .009% for all the system would be fully funded as far as you can project out. Cut benefits by 25% with the token increase it funds out for at least 200 years. The only way to declare Social Security bankrupt is by ignoring all revenue. The banksters don't like sharing that point. If you stopped collecting all wage withholding today, Social Security doesn't go "bankrupt" until 2037. It is, compared to say the Dow 500 companies, incredibly well funded. If you applied the same accounting principal to Microsoft (ignore all revenue) Microsoft would be bankrupt in about 9 months.
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 @the unvarnished truth  @Howard Beale  @T_BONE_WALKER You must have gone to public school. Go back and reread what I wrote because I never even suggested or wrote what you state that I did.
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Oh, and as someone who gets a 4.2% pay increase around October every year because I've maxed out my social security payments for the year, the 3% take home for 2-1/2 to 3 months sure doesn't break my bank account and I certainly don't build my personal budget assuming I get that bump.
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But as being part of what you call, "the rich," do I appreciate you want to make me richer. Funny, I never have created a job for anyone. Unless you count the occasional babysitter. Huh - I guess the rich do get richer after all. THANKS!
 @Howard Beale To be honest Howard, I agree with the majority of your positions on issues. The only real rub I have with you is the obvious intellect without the real alarm at what is certain with regard to the economy.
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The "Fiscal Cliff" is not the problem they would have us believe it is, its a symptom of the problem.
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I take claim for the rest of our differences just due to the fact that I am an old leftist and dont really have patience for half measures with regard to social and economic justice for US families. I should be more reasonable I guess.
 @T_BONE_WALKER Time to start confiscating all the wealth of our congressmen and senators and apply that to our national debt. They've been stealing from us for decades. Time to make them pay their fair share.
115,000,000 tax payers at a rate of 1.5% making over $250,000 means 1,725,000 people making over $250,000. If taxed like they were back in the early 70's when the economy was booming would certainly help out our tax situation but of course its not going to balance the budget. Cuts are going to have to be made. Military should be the first. But as we congress makes cuts its going to hurt the economy, no way around it. We should just default on the debt. That would save $4 trillion on interest alone.
Every one keeps talking about numbers, fine, lets bring up something that I have not seen on anyone's comments. Based on the 2006Â census (haven't found the latest 2012 figures) the number of people then who earned $250,000 and above was 1.5% of the population. Â That 1.5% was reported as 1,699 people. Â
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Our country is being led off a cliff like a bunch of lemmings because less than 2% of our country are holding the leash of the government and are cracking a whip so they don't have to pay a higher tax rate. Â
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my source:  http://en.wikipedia.org/wiki/Household_income_in_the_United_States Â
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Well I still support a flat tax.Â
 @awchief Ahem. That 1,699 is the number of households, in *thousands*. More than a million households, over two million people (assuming most are married). That same top one percent is NOW paying nearly 40% of the total federal income tax...
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That said, I'd support a flat tax, too, like the FairTax ( www.fairtax.org )
 @RN1  @awchief You are right - he did misread the data - however his percentages are still darn close. There are about 110 million HOUSEHOLDS in the United States. Of those about 1.5% of them have a household income in excess of $250K a year. It is still a very small number of households holding the rest of the nation hostage. In that respect, they are correct.
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I am also in full support of a flat tax and an end to any and all loopholes. I am however not for flat beer, flat tires, and especially not flat chests.
 @Howard Beale  @awchief Good one. Never thought of a "flat tax" to be based on cup size...
 @RN1 I stand corrected, and misstated. It should have been "households" but that does not diminish the overall impact of the stats.  Â
 @RN1  @awchief The best way for the rich to pay less amount of total collected revenue is to raise taxes on them, which will benefit the economy and raise everyone else's wages so other people pay more tax.
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This is why when the top tax rate was 70%+ the rich only paid 17% of total revenue, because we were able to take their money, re-invest it into infrastructure and schools and lower-to-middle class people made more money and took on more of the tax burden.Â
 @NorthwestEconomist  @awchief After reading that, I think you may be confusing cause and effect. It's not that high rates reduce the amount the pay, it's that high rates kill capital formation, and therefore make them poorer, so they have less to work with and therefore lower incomes to be taxed. HIgh rates with lots of loopholes and deductions distorts markets and is essentially social engineer via coercive taxation.
Take the plunge so every one pays taxes! yah! then the big time cuts happen that Obama promised would not. I real cool thing is when the GOP said lets vote on Obama's plan Harry Reid shot that down and would not vote on it. what is up with that?
Anyone who thinks higher taxes have to hurt the economy is denying history. Prior to 1980 we had top tax rates above 70% and the world didn't end. Studies have proven that the "rich will adjust." Also, when the top tax rates are higher, the economy does better because the government can invest more in schools, roads, hospitals, that improvement life and the economic opportunities for everyone else, which raises up the middle class. Bring back a top 70% tax rate for the rich, somehow the super rich like JP Morgan, the Rockefellers and others had no problems paying it back then, I doubt they'll cry much over a few more billion they have to shell out now.
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Anybody who thinks Obama would use the new taxe money  for schools, roads and hospitals is wearing rose colored glasses. He will spend it and spend it fast! Thats the real reason the republicans won't give in. IT's A SPENDING PROBLEM!!!!
 @NorthwestEconomist A big part of the problem is not just the marginal tax rate, it's total Gov spending. The government is horribly inefficient at pretty much everything (Post Office, anyone) so ever dollar they spend that isn't a simple transfer payment is essentially being sucked out of the economy for non-economic activity. (yes, there are some exceptions, such as, perhaps the interstate highway system) The higher the rate of government spending, the slower the real growth rate. Borrowing and spending amounts to an accounting trick to move tomorrow's GDP into today... which leaves *tomorrow* in the lurch.
 @RN1 The USPS is not inefficient. They are required to prefund their pensions years ahead. That is what is killing them right now.Â
 @RN1  @NorthwestEconomist That's fine, lets go over the cliff, I welcome sequestration and even more cuts. We spend way too much on the military and we broke out tactically a long time ago.No doubt when the debt ceiling comes up hopefully the republicans will demand cuts in order to make a deal on it, and we'll some cuts there too.
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All in all, we're on the right track, raise rates on the rich and lots of cuts.Â
 @NorthwestEconomist All of the "plans" being actively discussed that I've seen so far are bad, being to short-sighted insufficient to deal with any of the BIG problems staring at us. Of these plans, going over the cliff might just be the least bad. The Rs are going to be blamed for everything no matter WHAT happens, so they may as well make O and the Dems own whatever they can... Interesting times, and the Chinese might say.
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 @the unvarnished truth They DID pay their taxes, which is why they only paid 17% of collected revenues. If you're concerned about class warfare issues then wouldn't you rather go back to a system where the rich weren't paying more than 40% of our government revenue?Very simple solution: raise and rates and eliminate all deductions for the super rich. Where are they going to go? Europe? Higher taxes there. Africa? Give me a break.Will they try and send away their money? That's OK, foreign governments now cooperate on helping the IRS find tax evaders. Â
 @T_BONE_WALKER  @the unvarnished truth So then you have to ask: "why did all those jobs get off-shored?" Could it have been that tax and regulatory burden made the US less competitive?
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Addressing the second point: it's basic psychology that people LIKE to spend money, buying stuff or power or whatever, a LOT more than doing the hard work of earning it. So, we have credit cards and loans and bonds and borrowing to consume today and put the pain off until tomorrow. Just about everywhere people CAN do that, they DO do that. The reason that we have to teach "save and invest, prepare for the future", and we have such a hard time doing it, is because it doesn't come naturally - it's counter-instinctual. But that's what must be done - pay NOW for what you use NOW. Borrowing, with a promise for someone else to pay it back later, NEVER ends well.
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In my opinion, we need to start the long and painful transition to a total pay-as-you-go system, with NO promises being made about future payment; no cash, no purchase.
 @the unvarnished truth " America isn't in trouble because of the rich. It is in trouble because of the greedy poor!"
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The US is in trouble for 2 reasons. First is because it has off shored almost all family wage jobs for 30+ years and replaced them with lower paying jobs. These lower paying jobs dont offer the federal tax base that was realized from the higher paying jobs. Now you insert a "Financial Crisis" and lose 30 million low pay jobs and then start trickling in even lower paying part time jobs with no benefits. You only have a fraction of tax revenue that you had before the offshoring of jobs. Then you start unfunded wars and provide unfunded tax cuts. Thats what has this country in trouble and it wasn't done by any "Greedy Poor" person.
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The second reason the US is in such financial trouble is that people like you dont even see what has happened in front of their faces and will never be able to take the obvious necessary action required to repair this country. In fact, with all the corporate bail outs and the transfer of wealth upwards over the last 3 years, how could you describe Obama as being anything other then extreme right wing? He has extended every Bush policy and doubled down on some also. He is the perfect right winger and he will get SSI privatization done for the rich as well.
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 @the unvarnished truth We had income taxes before 1914, or whenever the federal income tax started. We had a lot of them actually, to fund things like wars.Â
@NorthwestEconomist Hey I Know post smoking is legal now but prior to 1980 we did not have the economic growth we had either! during the 1980's and after they cut the clinton tax plan after his midterm election. so go back to your bong.
 @wynooheeman  @NorthwestEconomist You're right, the economic growth back then was sustainable and didn't roll up and down in huge bubble bursts like we have now, I'd take it over this in a heart-beat.Â
Any tax levied on business will be passed on to that businessâs customers. Most customers of most businesses have income below the $200,000. So who will really feel the tax increase? A tax on the so called rich, which by the Presidentâs definition include many small businesses, is really a tax on all citizens. Of course, one should not forget the 20 additional new or higher taxes that Obamacare inflicts on American families and small businesses.
 @Dumbfounded883 Keep sucking there, fella. Those guys with the money are bound to pass something that can be digested once more... eventually!
If is not the businesses that the administration is trying to raise taxes on: it is the corporate CEOs who "earn" literally 100x to 1000x what their rank and file receive in wages, and "investors" who milk $ millions or tens of millions of even hundreds of millions out of inherited fortunes or money they have talked others into trusting them with. The $250,000 threshold is for INDIVIDUAL income - not for joint household income of both husband and wife.Â
And the truth is, we are not talking about a tax rate that is even as high as was present in the 1960's, '70's and much of the '80's: we are talking about returning to or perhaps only NEAR the tax rates of the 1990's when we saw some of the most explosive growth of American business in many decades. Maybe this is what we need to bring that prosperity back!
I think you get my point. Where do you think that CEOsâ money comes from? They donât print it. They get it from selling merchandize and services to consumers. From the money they receive from their customers they pay their taxes. So if taxes go up on these businesses, it likely that the CEOs will want to protect their bottom line and so the consumer will be charge more for the merchandize and services they desire. So who is really paying the tax bill?Â
@JLS1950 @Dumbfounded883 What I don't get is who the F'n cares what person makes! if the share holders want give their CEO a trillion dollar bounus it is their right! if they cut jobs it is their right to do so! Those jobs belong to the company not to the worker who is hired to do the job. it is not his job it is the companies job! get over thinking everything has to be equal.
@JLS1950 @Dumbfounded883 And if you have a Chapter "S" corp then the income of the corporation is filed on your personal 1040...so you might "Make" over $200K or $250K on paper but only truly bring home 90K. I know several business owners in this position...the State or Oregon managed to drive ONE to Idaho with their "Tax the Rich" scheme. It would have left him unable to pay himself at the end of the day. And NO, he does not make even 10X what his lowest paid employee does...he worked HARD to do it right, pays well, good health and vision coverage as well as vacation and flexible time off for his workforce of nearly 40 people.
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The "Tax the Rich" is a naked and raw expression of jealousy and greed from those who dont have what they WANT in life and are too dang lazy to get off thier beknighted tookuses and work for it.
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Now I DO agree that incomes of all sorts need to be treated equally...earned income, derived income from stocks and investments, capital gains etc. Would level things quite a bit.
 @JLS1950 Lots of history, lots of changes, not enough room for addressing them all, but here are a few thoughts. Local spending is likely fairly consistent because it's close to home - you see what you are getting for your money, and you know the folks collecting and spending it. Deficit spending in harder when you know it's coming out of YOUR pocket, and not some anonymous "rich guy" far away.
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One big problem with a significantly progressive tax-rate, with the high-income folks paying a lot more in total than the lower income folks is because their income is a lot more variable, and timing-discretionary, it's much less consistent in it's predictability. That's why CA got boned by the tech-boom: they started spending, *and building in future spending*, as if the surge in options and profits would go on forever. They moved most of the tax burden to a small percentage of the population, and with the tech crash the tax base evaporated with it. Middle- and lower-income folks demanded lots of services (paid for by the dot-com millionaires" and were not willing to cut back when the funding source dried up. Now they7 have raised taxes to the point where lot more people will leave, and they'll be in even deeper kimchee.
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Schiff has a good blurb on history of tax rates since WW II : http://online.wsj.com/article/SB10001424127887324705104578151601554982808.html
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A lot of this comes down to the question of "for what purpose are you taxing people?" Raising money to fund necessary services (defense, police, courts)? Social programs (welfare, disability, SS)? Social engineering (fat tax, tobacco tax, "sin" tax, fund things like the arts)? "Fairness" (tax the rich because they don't "need" it, so you can "spread it around")? Depending on your goals, one form of tax, or tax level may be more appropriate than another: "fairness" cares not for how much is raised (only HOW), but funding necessary services ONLY about how much is raised. In general, it's my observation that regardless of what they SAY about it, libs and conservatives look at taxes from totally different perspectives on the goals/purposes of taxes, and THAT is why they disagree on what/how taxes should be done as much as what level they should be.
RN1, I would consider it fair if they paid the same gross % that i do.
 @RN1 First of all, if you take a chart of only Federal spending, you are ignoring state and local spending (and hence taxes). Looking at the chart you provide, comparing spending to GDP, prior to 1916 and especially prior to 1902, the federal government was VERY small, and state and local governments were where the spending was happening.
Now what changes? The first big spike is called WW-I - wherein we stepped in to save critical trading partners and allies from a threat which - if not stopped then - would have nailed out butts to the wall soon enough. Then there is a rise around 1933 as the FDR administration started dealing with the effects of the Roaring '20's and 3-1/2 years of severe, wholly-unchecked recession and economic collapse. Soon enough came WW-II, when we again had to deal with two very major threats to our very survival. We see another little hump in the early 1950's as we dealt with communist aggression in Korea and nuclear saber-rattling directed at Europe by the USSR. Then the slope settled down and even declined slightly until in 1980-81 (what happened then?) it turned sharply upward again for a decade, then turned back downward sharply after 1992, and again turned upward in 2001. What was all THAT about??? At the fir right of the chart, you can see that federal spending as a percentage of GDP is now ramping DOWN again.
Now there is another factor that needs to be understood: GDP is NOT equivalent to aggregate domestic individual income! (see for example http://answers.yahoo.com/question/index?qid=20081230233151AAeHmf8) Prior to WW-I, the US was primarily an EXPORTING nation, and exporting raw materials and produce much more than manufactured goods. OUR people were not buying our GDP - it was being shipped elsewhere - and they were not receiving wages or other income commensurate thereto. Profits from exports were going into a relatively few corporations and into the pockets of a relatively few people - many of whom actually lived in Europe. With WW-I there was a substantial industrial buildup, but the US remained a net energy (and other raw material) EXPORTER up to and perhaps even through WW-II. (Japan would not have been able to attack us save that WE sold them the oil to do so. Likewise, WE sold Hitler both the fuel technology (through SOCal and Dupont) and the oil (through ARAMCO) to attack the rest of Europe.
But after WW-II, the US became a net IMPORTER, and individual wages rose in step with demand for both domestic and imported goods. Thus, the ratio of individual wages to GDP has likely skewed very considerably over the last 50 years, especially as spending has moved deeply into deficit mode.
Curiously, local spending as a percentage of GDP has really not changed very much since WW-I (width of gray stripe, not its height) although the local tax base has become more and more regressive during the same period, placing more and more of the burden on the less-affluent portions of society. State spending seems to have increased substantially, especially in the late 1960's and early '70's, the '80's, and after 2000. Why do you suppose that is?
 @JLS1950  @Woodswalker Why should a person who is growing his business, providing an in-demand good or service, have to spend a fair bit of money or time to fight the tax-man, rather than spending it making his products better, lowering his prices, or taking more home to spend on his family? How does that benefit his business? Requiring everyone to hire a security guard would stimulate employment (sort of) but it would also be a big drag on efficiency.
 @JLS1950 I suppose it depends on what you mean "properly" funded. I'd like them to do a WHOLE lot less, because it drives the cost of everything up. If they get out of higher ed (including loans and grants, regulations, et al), prices of a college education would fall, and there's be a LOT few non-productive administrators. Get them out of lots of other things (like housing loans) so there is a real market, and get them out of bailouts so real risk assessments can be made.
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As for the history of government spending, I think you are a bit off. Take a gander at the chart here (not necessarily the best, just the first one I grabbed)
http://www.usgovernmentspending.com/spending_brief.php
It has ramped up from much less than 10% to it's current gigantoid number, and much of that is telling people how to run their lives and insulating people from the consequences of their own stupidity. I'd agree that SOME government services are needed, and I'd bet that it could be met with no more than 25% of the economy to meet our needs at ALL LEVELS of government (local, state, federal). THe problem is that we have been borrowing from the future for far to long, and not realizing the real costs of the services we are asking for. Some significant but simple tweaks can solve a number of our problems.
AND there should be NO havens past the limited income that can be sheltered in a 401K or IRA. IHMO...the form 1040 should be a postcard...and printed with the address only on one side..the other side would be the tax formula... Earned-401K/IRA contributions, -basic deductions=taxable income X YY%= taxes owed.
@JLS1950 @RN1 Except that the goobers we keep electing, keep spending over the limits of the income...at some point there will be nothing to spend on "stuff", it will all go to servicing the debt we are building...and the cuts will be BRUTAL..and worse the longer we wait.
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 @RN1 Historically and statistically it takes between 33% and 50% of all residents'/citizens' income (and counting ALL forms of local, state and federal taxation) to properly fund all levels of government: federal, state, county, city - the whole shebang. 33% provides pretty basic government, defense, law enforcement, public services like road and sewer maintenance, code enforcement, very basic safety net for the poor / disabled / retired / suddenly unemployed, etc. (This is also the biblical standard from the time of 1&2 Samuel, it that means anything at all to you.) 50% provides a pretty socialized society with things like healthcare and perhaps even secondary education also covered.
Our present system is biased differently on the local, state and federal levels. At the local level, nearly all taxes are local sales taxes, and because the less income you have the more of it you spend on taxable purchases, the fact is that poorer people pay a disproportionate share of local taxes for their income level: what we call a "regressive" tax system wherein the tax burden is placed on those LEAST able to pay. At the state level the bias shifts a bit toward the more affluent, owing to real property taxes and motor fuel taxes primarily. The more property you own and the more cars you drive (and further) the more taxes you pay.
The federal income tax system was at least marginally intended to balance these out by placing more of the burden on higher income brackets - e.g. a "progressive" tax system. In reality, this has not worked, largely because the more money you have to manipulate, the easier it is to "hide" it from the tax man by seeking tax-free investments and various kinds of deductions and credits. At present, the federal income tax system places the largest tax burden as a percentage of income on those having individual incomes between about $50K-$70K (depending on number of children/dependents) and about $180K or so. Below about $40K, many people will pay no income taxes at all, and above about $180K (and especially above $1 million) one's net federal tax rate is likely to be less than that of a working person earning $60K or so. This is what the administration is attempting to correct, at least in a measure.
So the bottom line is, if the top 1% or 2% of "earners" are paying about 33% of their personal income in taxes at SOME level (federal, state and or local) - and all the rest of us are doing likewise at SOME level - then we should not have any real problems.
No...growing the company at a staggering rate. Yeah, Rick might be out of "S" territory...but its a chore and expensive to change the corp over as well. Moving to ID was a pretty good deal. More space, better facility, 80% of his workforce moved as well AND the texes are more friendly. He is hiring to replace the 20% that didnt move as well as adding another shift with NEW workers.
 @JLS1950  @Woodswalker That's a BIG "IF." What percentage would YOU consider a "fair share" of the federal tax burden for the top 1%, 5%,or 10% to pay (either as a percentage of their income, or a percentage of total taxes paid?)
 @Woodswalker If the rich are not paying their fair share of the costs of maintaining the country that allowed them to become rich... then they NEED TO BEGIN. As for your Sub-chapter S friends, evidently they do not know how to do accounting if they "only took home $90K". They are letting cash or assets accumulate in the company without properly accounting tor depreciation - so that on the books they have at least $160K of additional equity in the company. If they are potentially able to sell the company for that much more, then perhaps you should be reconsidering how much they "took home". If not, then they flunked bookkeeping and need to go back, fix it, and file amended returns. On the other hand, what they really have may be unrealized capital gains in the company they own: maybe they have outgrown Sub-chapter S?
2014 Dem plan for taking control of house = Go over fiscal cliff.
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Dem plan for actually helping our economy =Â 0
@acepaul  No that's the GOP plan. Which will cause the GOP thinning of the herd. During the next elections.
 @DDG You are a bit confused. Why would that be the GOP plan? They know very well that the Dem propaganda machine will successfully pin the blame for this on them. Not to mention the Dems get a couple things they really like, higher taxes and defense cuts.
they should all start wearing clown suits