Obama supporters shocked, angry at new tax increase

You may have caught this on Drudge already, but Joseph Curl, writing in the Washington Times, has an interesting take on the recent tax increases being felt by Obama supporters.  Here are a few of the (kind of funny) quotes that he obtained: 

“I know to expect between $93 and $94 less in my paycheck on the 15th,” wrote the ironically named “RomneyLies.”

“My boyfriend has had a lot of expenses and is feeling squeezed right now, and having his paycheck shrink really didn’t help,” wrote “DemocratToTheEnd.”

“BlueIndyBlue” added: “Many of my friends didn’t realize it, either. Our payroll department didn’t do a good job of explaining the coming changes.”

“My paycheck just went down. So did my wife’s. This hurts us. But everybody says it’s a good thing, so I guess we just suck it up and get used to it. I call it a tax increase on the middle class. I wonder what they call it. Somebody on this thread called it a ‘premium.’ Nope. It’s a tax, and it just went up.”

“$86 a month is a lot. That would pay for … Groceries for a week, as someone said. More than what I pay for parking every month, after my employer’s contribution to that. A new computer after a year. A new quality pair of shoes … every month. Months of my copay for my hormones. A new thick coat (on sale or at discount place). It would pay for what I spend on my dogs every month … food, vitamins, treats.”

These reactions are in response to the social security payroll tax holiday that held the rate at 4.2% until the fiscal cliff deal mandated that it go back up to (normal) 6.2%.  These samples are anecdotal  to be sure.  The majority of citizens out there probably understand (at least they should once it is explained) that the social security tax holiday wasn’t permanent and would eventually need to snap back to the 6.2% it was before.

 

 

 

’Twas the Night Before Cliff-mas

http://blog.heritage.org/2012/12/24/morning-bell-twas-the-night-before-cliff-mas/

’Twas the night before Cliff-mas, and all through the House Not a member was working, no ideal to espouse; Their offices closed, the members all gone, No solution for a budget plan had yet to be drawn.

Our Congress had spent a year feuding again, While uncertainty and poor growth plagued businessmen; The economy had slowed, unemployment was high, Things weren’t looking up for a taxpayer, like I.

On December 31st tax rates were scheduled to rise, Which many agreed was not in itself wise. With this, another date caught the country’s fiscal fixation—The second of January was set for across-the-board sequestration.

I’d heard all the talk, all the senators saying, “If we’re spending this much, someone has to be paying!” The rhetoric from the news droned on in my head, As I turned off my light, and crawled into bed.

When out on the Mall there arose such a clatter, I sprang from my bed to see what was the matter. It was the President! His sudden arrival was thrilling, He went after the Congress, he called them by building:

“Now, Senate! Now, Hart! Now, Russell and Dirksen! On House! on Rayburn! on, Longworth and Cannon! The fiscal cliff is approaching! We need to make cuts! Bad policy and spending got us into this rut!”

Out came the lawmakers, their cheeks from sleep rosy, I saw Boehner, Reid, McConnell and Pelosi; They gathered together, their eyes straight ahead, Some seemed optimistic, as the president said:

“We need to end this uncertainty, if we are to stay strong, I know we can do it, if we all get along. We won’t hurt the middle class, we’ll raise taxes on the wealthy! It’s right for everyone to pay a fair share to keep our economy healthy!”

Reid stepped up as well, his voice rather hoarse, “We know that we need to include a few cuts, of course. This deficit spending hurts our economy in the long-run, But for now, raising some taxes will help everyone!”

“Now hold on one minute,” Boehner said with a sigh, “You know the tax increase you propose is too high! The wealthy you speak of—they aren’t you and me; They’re middle-class, and small business owners you see!”

“You won’t close the tax loopholes, you won’t lower our debt! You’ll create a situation where new investors will sweat! We need tax reform, to resolve all this clutter!” He stepped back with a nod—the crowd started to mutter.

Was he right? Was it true? Could reform solve it all? Or would a tax hike spur investment and keep us from a fall? It was the same talk I’d heard, the same from before—So I ran down the stairs, and I opened the door:

“You say you’ll manage the tax code, and cut wasteful spending, But it’s these political struggles that keep our economy pending! We need real reform, not this spending obsession; ‘Else this cliff should put us in another recession!”

The lawmakers started, they had not known I was there; And they sputtered and scattered and ran without care; I watched them go and yelled after them, as they took flight: “Avoid the fiscal cliff for all, and to YOU a good-night!”

No deal is better than a bad deal on the fiscal cliff

Avik Roy writes in Forbes that the recalcitrant GOP representatives may be right in resisting the current “Plan B” as put forth by John Boehner. If we go over the “fiscal cliff” there are some aspects of the cuts and tax increases that, though painful, might be wise. First, he summarizes what are the main two components to the fiscal cliff:

Fiscal cliff component #1: Tax increases

The first aspect of the fiscal cliff is that taxes will go up. Income tax rates will revert back to the rates we had under President Clinton, leaving aside the additional $1.2 trillion in tax increases that Democrats passed under Obamacare. The top income tax rate will rise to 39.6 percent from 35 percent.

In addition, there are a number of other temporary tax provisions that will expire. Congress steps in every year to add an inflation adjustment to the Alternative Minimum Tax, because the AMT was not originally indexed to inflation. Without an inflation adjustment, more people will meet the income threshold for the AMT.

The deficit impact of extending these provisions, as people on both sides of the aisle want to do, is $330 billion in 2013, and $420 billion in 2014, according to the Congressional Budget Office.

If Congress were to extend all of these temporary tax provisions except for the lower tax rates on individuals with incomes above $200,000, as President Obama has advocated, the deficit impact would still be steep: $288 billion in 2013, and $382 billion in 2014.

Fiscal cliff component #2: Spending cuts

The second aspect of the fiscal cliff is that, if we go over it, spending will go down. Temporary payroll tax holidays, which reduce the Social Security and Medicare payroll taxes paid by employed individuals, will expire. In addition, the “temporary” extension of unemployment benefits undertaken during the recession will finally end. Continuing those temporary tax holidays and temporary unemployment benefits will increase the deficit by $108 billion in 2013, and $150 billion in 2014.

Importantly, Medicare’s Sustainable Growth Rate will take effect, reducing Medicare’s payments to physicians by tens of billions of dollars. This provision, and a few others, will reduce federal spending by $40 billion in 2013, and $61 billion in 2014.

In addition, the Budget Control Act—the law passed last year during the epic debt-ceiling fight—automatically sequesters, or reduces, defense spending by $24 billion in 2013 and $51 billion in 2014.

Next, he analyzes why it might be better to suffer through the above-outlined events rather than hash out a deal that Obamacare-esque in its integrity:

Much of the Republican behavior on Capitol Hill has been driven by fear of how the electorate will view Republicans if they don’t continue to pass temporary tax cuts. But reducing the deficit will have to happen sometime, and whenever it happens, it is likely to have some negative impact on the economy. If Republicans don’t want to reduce the deficit two years away from the next election, under a Democratic President and a Democratic Senate, they’ll never reduce the deficit. The time to reduce the deficit is now, before a real fiscal crisis emerges, one that makes Greece look like a picnic.

By leaving town and letting America go over the fiscal cliff, Republicans don’t have to vote for tax hikes that they justly oppose. Economically counterproductive spending, like the unemployment benefit extension, will come to an end. And an enormous amount of irresponsible accounting gimmickry, like the annual wrangling over the Medicare “doc fix,” will end also.

And once Democrats gain their generational victory—returning to the Clinton-era tax rates—what case will they be able to make for even higher tax increases next year? Instead, the conversation will move back to what it always should have been about: the fact that the government spends too much taxpayer money, money it doesn’t have.

To solve our debt crisis, just sell Alaska

In an opinion piece in the Washington Post, Steven Mufson puts forth a novel idea: have the federal government sell its 69% share of its land holdings in Alaska.

Absurd? No more absurd than the spectacle taking place right now as we skid closer to the “fiscal cliff.”

Selling real estate at top dollar is all about timing, and now’s a great time to unload the 49th state. The federal government, which owns 69 percent of Alaska, could cash in on the vast, resource-rich state at a time when oil prices are high and wild salmon is flying off the shelves at Whole Foods. Selling Alaska could fetch at least $2.5 trillion and maybe twice that amount, enough to lop off a huge chunk of the national debt and perhaps as much money as President Obama and House Speaker John Boehner hope to save or raise over the next decade.

The real question is who would be in line to purchase it.  The obvious folks would be Russian and China.  However, a private individual could assemble the investor funds to make the purchase as well.  How about The Donald:

How about an individual buyer? Donald Trump comes to mind. He could advertise on Mount McKinley — or just rebrand it Mount Trump, the highest peak in Trumpistan. He could even issue his own birth certificates to avoid any confusion about the national origin of public officials there. Of course, this 570,640.95-square-mile bauble would be a tad expensive for him, and he’d have to make it a very leveraged buyout, but he’s gambled big before.

Forbes: what the GOP should do regarding the fiscal cliff

http://www.forbes.com/sites/steveforbes/2012/12/06/message-to-gop-no-tax-increases-go-on-offense/

Bring Back the Ownership Society – SmartMoney.com

http://www.smartmoney.com/invest/strategies/bring-back-the-ownership-society-1323110888277/

The Political Risks of Cliff-Diving

In his latest piece, Karl Rove describes the political realities of going over the fiscal cliff.  His bottom line is that the result from such an event may harm both the President and Congress, however, the lasting effect could cripple Obama during his second term.

If negotiations stall and Washington plunges over the fiscal cliff, it will weaken Mr. Obama’s ability to bend Congress to his will, hasten the moment when congressional Democrats become more concerned about their standing than that of a lame-duck president, and further poison relations with Republicans.

On top of all that, a second-term president has total ownership of the economy. If the Congressional Budget Office is correct and going over the fiscal cliff causes the economy to shrink and unemployment to rise—while Americans see tax bills going up an average of nearly $3,500—then Republicans won’t escape blame but neither will the president. The damage to him may be long-lasting.

A weakened Mr. Obama makes recruiting and preparing for the 2014 midterms easier for Republicans and harder for Democrats.

 He also spells out the strategy that the GOP should follow in navigating the fiscal cliff issue:

The key for Republicans is to appear flexible rather than intransigent, willing to compromise rather than eager for a political smashup. This requires them to keep offering sensible alternatives and emphasizing that the country’s problem is too much spending. It will eventually sink in with many voters that Mr. Obama previously endorsed the GOP’s approach of generating more revenue through tax reform (not increased tax rates) and that his real goal is bigger government, not smaller deficits.

Republicans, therefore, must continue to volley.  Always put the ball back in the President’s court and make him decide that he’s out of ideas.

What Americans see in the fiscal cliff standoff

Perhaps the President thinks he has more political capital than he really does:

Americans who voted for Obama reflect that call for balance more than his ultimatums have: Politico reported Monday that a poll for a moderate Democratic think tank, Third Way, found 85 percent of Obama voters favoring higher taxes on the wealthy: “Yet 41 percent who supported the Democratic incumbent want to get control of the deficit mostly by cutting spending, with only some tax increases, while another 41 percent want to solve it mostly with tax increases and only some spending cuts. Just 5 percent of Obama supporters favor tax increases alone to solve the deficit, half the number who back an approach that relies entirely on spending cuts.”

via What Americans see in the fiscal cliff standoff – chicagotribune.com.

Veronique de Rugy: Raising Taxes on Everyone

Raising Taxes on Everyone – By Veronique de Rugy – The Corner – National Review Online.

Here’s an interesting quote from the article:

The U.S. generally has lower taxes than European countries but our overall federal tax system is unusually progressive. By contrast to the U.S. federal government, like it or not, European governments are raising lots of revenue from low-income people to pay for the services provided to them, as this article in The Economistclearly explains. The result is more revenue but also more government (and still some deficits). Americans like to think they are very different from Europeans. They claim to prefer smaller government and lower taxes. But what they’ve got instead is lots of spending that most taxpayers would rather not pay for.

This, by the way, is why I thought the Bush years were so toxic. Cutting taxes while increasing spending dramatically — Bush increased real spending by 60 percent, as opposed to Clinton’s increase of 12.5 percent — is a recipe for large deficits leading more taxes later or certainly intense pressure to raise taxes. My colleagues Matt Mitchell and Andrea Castillo have a new paper on this issue that I highly recommend for those considering the current debate. This mentality persists today: We are faced with large deficits but many lawmakers still aren’t serious about restraining spending, choosing instead to retreat behind a debate over the tax treatment of high-income earners.

Balance the budget without raising taxes IS possible

The Washington Times describes how to close the deficit without raising taxes. Obviously, there are two competing thoughts on the subject: the Center for American Progress (left leaning think tank) proposes perpetually higher taxes and an actual increase in overall spending. On the other aide, the Heritage Foundation describes a way that balance can be archived without taking more funds out of the private economy.

Obama’s favorite think tank, the Center for American Progress, submitted a plan that calls for the federal government to eat up more than 20 percent of the American economy through taxation every year, in perpetuity. Being the liberals that they are, CAP calls for even higher levels of spending — above 22 percent of GDP by 2022 alone.

Contrast CAP’s plan with that of the Heritage Foundation. It returns taxation to just above the historical U.S. average at 18.5 percent of GDP. By cutting spending to pre-Great Society levels, the Heritage plan not only balances the budget but actually begins to lower our cumulative national debt.

Heritage achieves these savings by repealing Obamacare; making the wealthy pay more for their Medicare benefits and shifting the program to a premium-support model; capping Medicaid spending and turning the program over to the states; and transforming Social Security back into an anti-poverty program as originally promoted by President Franklin Roosevelt.