Saturday, January 5, 2013

The 45% tax rate and $205B in giveaways

Sometimes, it takes a WSJ editorial to walk you through something and the indie press nosing around in order to understand how good or bad legislation is.
This morning's editorial states that the highest tax rate on those making $450,000 a year will be in the 45 percent range, higher than most people think. That's because of the ObamaCare surcharge kicking in as well as other things. Also, 80 percent of deductions and exemptions are ending for millionaires, according to the editorial, due to the phaseout of Personal Exemption Phaseout and the Limitation on Itemized Deductions (PEP/PEASE). 
So while not truly completely "making millionaires and billionaires pay a little more," there is a bit of good news here about making them pay a little more, if that is what your focus is. The fact remains that the deficit and debt are such massive problems, everyone is going to need to pay more while cutting all federal spending drastically. 
The problem though then becomes that, like I wrote before, the cuts haven't materialized, and the giveaways added to the deal are unfathomable and unconscionable 
Matt Stoller over at has an overview of some of the billions in giveaways that have been extended by the fiscal cliff agreement. These are some of the same things that Democrats have historically wanted to end but would blame the GOP for standing in the way. Corporate welfare, you know. These are some of the tax changes we all have to support in order to truly fix the revenue problems. It's truly "paying your fair share." Why should you or I pay more while Disney and Goldman Sachs get away with paying less? Now, again, both parties are truly to blame, when you look at the fine print. 

Wednesday, January 2, 2013

The joke that was the fiscal cliff vote

Washington didn't "fix" anything: They made things worse.
The fiscal cliff/sequestration deal that was approved on Jan. 1, added more deficits and debt to the federal budget that anyone could have imagined while raising taxes and allowing other tax breaks to expire. And again, both political parties are to blame for this disaster. 
This entire mess was supposed to be about reducing deficits and eventually, debt, not adding to it. The deal raised taxes on those making more than $450,000, so the president got part of what he wanted and the GOP was able to protect households on the upper level - folks who make more than most of us but in a lot of cases are not millionaires. 
At the same time, the president and Senate Democrats loaded the thing up with more spending including changes to the AMT, business tax breaks for rum producers and Hollywood, unemployment benefits, and other giveaways. The CBO reports that the votes just taken add $3.9 trillion in deficits to the $9+ trillion expected during the next decade, for a grand total of more than $13 trillion in deficits by 2023, approximately. 
Since the debt will soon be at $17 trillion, the federal government will be at $30 trillion in debt in just 10 years, assuming nothing is done to offset those debt levels. This amounts to about $100,000 in federal government debt for everyone man, woman, and child who is a citizen living in the United States right now. These numbers don't include entitlement and pension obligations that are expected to be in the $90 trillion range very soon. 
And let's be clear - none of these actions will create any new jobs because, as I've written before a number of times, the long-term job problems aren't about more federal government spending, more education spending, or anything else. The federal government is spending more than ever before, in actual dollars. The long-term unemployment problem is about globalization, free trade, and to a lesser extent, technological advances that have increased worker productivity. It's not about "making millionaires and billionaires pay a little more" - it's about you needing to make $30K a year to get by while people in China and India will do the same job for $1K a year in corporate costs. 
Well, the Democrats got what they wanted and most of the GOP went along with it. You'll see, it won't work ... and things are going to get worse.  

The future
In two months, all parties are expected to sit down and start ironing out potential spending cuts. And the entire nasty nonsense-go-round will start again, keeping everyone in perpetual campaign mode. 
The Democrats say they have $1 trillion in cuts over 10 years on the table but that is a drop in the bucket when staring at now $13 trillion in deficits and $30 trillion in debt. At the same time, the GOP wants spending cuts but aims a lot of them at the elderly and the poor. The "spending cuts" proposed by Democrats aren't cuts at all; they are reductions in the level of potential increases, meaning it's mostly word play; the GOP won't touch their blessed military spending even though Japan and NATO have no known enemies and we can no longer afford to be the police of the world. 
Yes, the drawdown of the wars is in the savings everyone is projecting and that's real, but it's not enough. Everyone needs a true education about what is going on, especially when staring at the pension and entitlement obligation and the size and scope of the federal government while considering that there are layers of local, regional, and state governments doing much of the same work. 
So here's the big question for the future: What happens when people sit down and realize that taxes have been raised on the rich, the wars have been drawn down, and there's still a massive hole and people are still out of work? That will be interesting to see.