Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Taxmageddon

“Fiscal Cliff” Already Slowing the Economy

English: A closeup of the fireball and mushroo...

Mushroom cloud (Photo credit: Wikipedia)

Patrice Hill of the Washington Times makes a very good point:  the impact of the so-called “fiscal cliff” – Taxmageddon – is already being felt in the economy. People are frightened about the future, and so they are hunkering down.

And it’s no wonder. Here’s what the “cliff” looks like:

  • reductions in itemized deductions and personal exemptions
  • increases in taxes on capital gains and dividends
  • the marriage penalty returning
  • estate tax reinstated
  • increase in the payroll tax
  • cuts in unemployment benefits
  • child tax credit cut in half
  • 10 percent cut in military spending
  • 8 percent cut in discretionary government spending

And these are just a few of what happens on January 1st if Congress does nothing about them.

Please understand that this is not a plea for Congress to “do something”! It’s just an iteration of

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Bringing Taxmageddon Home

Education News: Taxmageddon: Tax Tsunami Could Hit January 1, 2013

By any measure, the impending tax increases are huge! Taxmageddon will amount to $494 billion in tax hikes. On an individual level, average taxpayers will see their taxes increase by about $2,000 to $4,000 next year!

This article from Education News is helpful in that it provides real life examples of how real people are going to get hit by Taxmageddon next year. $494 billion is an impossibly large number that no one can relate to. But boil it down to my level and you get my attention!

For example, here are Roberto and Juanita who have an income of $70,662:

Roberto and Juanita have an Adjusted Gross Income (AGI) of $70,662. They are concerned about the looming Taxmageddon tax hikes and want to know how it will affect them.

Their taxes will go up $4,138 next year due to Taxmageddon.

Let’s press this a little bit. That’s $344 a month. That’s a car payment. That’s a contribution to their IRA or their 401(k) or college fund. That’s a payment on their credit card that they’ve been trying to pay off.

And then there’s Frank who makes just $24,757 a year:

Frank has an Adjusted Gross Income of $24,757. He does not consider himself a “low-income worker.” He works hard and earns a steady living but he is on a tight budget.

Unfortunately, Frank will have to pay an additional $1,207 in taxes next year…

Frank’s monthly income, after deductions, is just over $2,000 a month. Another $100 a month taken out of that? What does that mean for Frank? A smaller apartment? Skipping some meals? Moving in with mother?

And then there’s Teasha who just started work. Yes, she found work! It pays her about the same as Frank:

Teasha has an Adjusted Gross Income of $23,917. She has just started her career and is glad she was able to find a job…

She will face a tax hike in 2013 of $1,099.

She’s just starting work. What a great incentive! Another $100 a month that she wasn’t expecting.

The article then explains how Taxmageddon will affect you: multiply your Adjusted Gross Income from last year—you’ll find it on the front page of last year’s Form 1040—by 6%.

That makes it real personal.

Taxing the Rich Would Not Slow Economy, Says White House

Logo of the United States White House, especia...

Logo of the United States White House (Photo credit: Wikipedia)

When President Obama’s tax plan was revealed, international accounting giant Ernst & Young (E&Y) was asked to analyze it by the National Federation of Independent Business and the U.S. Chamber of Commerce. When the firm announced its conclusions that his plan would slow the weak economy even further, the White House attacked the study as containing “major flaws, errors and misleading statements.”

Obama’s tax plan is more than just “taxing the rich”—it contains a mixture of tax credits for hiring new employees, a mortgage credit, an “American Opportunity Tax Credit” to entice more young people to get into debt to fund their college educations, an increase in the child and dependent care tax credits, and an extension of and increase in the earned income tax credit.

It would also eliminate all income taxes for seniors with incomes less than $50,000 per year, and would temporarily eliminate income tax on unemployment insurance benefits—both clear political plays for the senior and unemployed vote in the November elections.

It also reinstates the estate tax and would eliminate “loopholes” for oil and gas firms, while providing tax credits for green “renewable” investments. It would create a watch list of international tax havens in order to force “greater financial disclosure” to discourage the use of tax shelters by the wealthy trying to avoid taxes.

But the centerpiece of Obama’s plan is allowing the Bush tax cuts on incomes, capital gains, and dividends for those making over $250,000 a year to expire—essentially a huge tax increase on those with capital. And that’s what the report’s authors, Drs. Robert Carroll and Gerald Prante, focused on: What impact would the imposition of those new taxes have on

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Only Tax Cuts Can Stop Trillion-Dollar Deficits

President Kennedy delivers radio and televisio...

The U.S. Treasury Department announced on Thursday that the federal government’s deficit for the first nine months of its 2012 fiscal year exceeded $900 billion and that the country is on target for another $1 trillion annual deficit for the fourth year in a row. And this was despite the fact that revenues for the same period actually increased by five percent.

In simple terms, government is growing more quickly than the economy can generate the revenues to feed it. And if the status remains quo, the economy will continue to stagnate. At present it is informally in recession, there is gridlock in Congress, elections are four months away, and Taxmageddon—the “fiscal cliff”—awaits taxpayers on January 1. All of this is sufficient to cause even the hardy to tremble.

What the president and a compliant Congress have managed to do over the last four years is to increase government spending, compared with what the economy generates—the gross domestic product, or GDP—to the highest level since WWII. James Glassman’s study of deficit spending under the last five presidents shows that President Obama’s ratio of deficit to GDP is 8.9 percent, compared to George Bush senior’s 4.2 percent, Ronald Reagan’s 4.2 percent, George Bush junior’s 2.7 percent, and Bill Clinton’s 0.5 percent. Putting that into perspective, Obama’s deficits are running between two and fifteen times greater than his predecessors, with no end in sight.

In fact, if the economy’s output declines as many economists are predicting, revenues will fall, resulting in even higher

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CBO Director: U.S. Accelerating Toward Economic Cliff

Congressional Budget Office Director Doug Elmendorf testified on Wednesday before the House Budget Committee about the federal government’s “Long Term Budget Outlook.” His office just released its latest study which showed two scenarios: one bad, the other worse.

Said Elmendorf:

It is not possible to keep taxes at their [present level] and keep the laws unchanged for Social Security, Medicare and Medicaid…

It is possible to keep taxes at their [present level] but only by making substantial cuts…in [those] large entitlement programs…

Alternatively, it is possible to keep…[those] large entitlement programs unchanged but only by raising taxes substantially on a broad group of Americans…

Even if spending on…other programs [outside the entitlement programs] fell to a smaller share of GDP than we’ve seen at any point since World War II, debt would still be on an unsustainable upward trajectory…

That’s what is facing Congress as 34 Senators and 435 members of the House are deep into their reelection campaigns. And all that Congress is likely to do is use Elmendorf’s comments and his office’s analysis as fodder for their constituents to help them keep their jobs.

A spokesman for likely Republican presidential nominee Mitt Romney said,

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Congressional Budget Office Predicts Recession

WASHINGTON - JANUARY 26:  The Congressional Bu...

The latest report from the non-partisan Congressional Budget Office (CBO) released on Tuesday said that if the country falls off the “fiscal cliff”—variously also called “taxmageddon”—it will likely enter a new recession. With the ending of the Bush-era tax cuts, the termination of extended unemployment benefits, the reimposition of the payroll tax rates back up to 6.2 percent from the current 4.2 percent, and the “sequester” cuts in government spending demanded by the agreement that Congress hammered out last summer in order to raise the debt ceiling, the CBO predicts that the country’s Gross National Product (GNP) will go negative for at least two quarters, which is the classic definition of a recession.

But, adds the CBO, if Congress does nothing, the longer-term benefits could be significant: a lowering of the annual deficit by about $600 billion in the first year, and lower deficits in the out years. This would reduce the danger of spiraling interest costs on the $16.4-trillion national debt along with a lower risk of further credit downgrades of the government debt by various rating services. In other words, according to the CBO: pain now or pain later.

If, as is likely, the Congress just simply sits on its hands and waits until after the November election or January 20 when the next Congress takes over, the problem just gets worse. As the CBO notes: 

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Taxmageddon Confrontation Has Already Begun

Taxes

Forty-one Senate Republicans sent a letter to Senate Majority Leader Harry Reid last week urging him and Senate Democrats to start addressing “taxmageddon”—the impending tax hikes that will drain $500 billion out of the economy every year starting January 1st, unless something is done:

It is essential that Congress and the president address these coming tax increases this summer, rather than creating additional uncertainty for families and job creators by waiting until the last possible minute. The time to begin is now.

[If nothing is done] this would be, without any exaggeration, the largest tax increase in American history.

House Speaker John Boehner, on ABC’s This Week, added:

We’re looking at the largest tax increase in American history on January the 1st. We’re looking at big cuts to our Department of Defense. And we’re looking at an increase in the debt limit. Why do we want to wait to rush this through at the end of the year after the election?

Speaking for the Democrats, Rep. Nancy Pelosi (D-Calif.) drew the line in the sand

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Boehner Fires First Salvo in Taxmageddon Wars

U.S. President is greeted by Speaker of the Ho...

House speaker John Boehner decided on Tuesday to fire the first round in the coming battle to deal with the huge tax increases taking place after the first of the year (“Taxmageddon”) by setting the terms for the debt ceiling debate. In a speech at the Peter G. Peterson Foundation’s 2012 Fiscal Summit in Washington Boehner said that any discussion would revolve around his “Boehner principle”—every dollar of additional debt increase for the federal government must be matched by an equal or greater reduction in government spending.

Said Boehner:

When the time comes, I will again insist on my simple principle of cuts and reforms greater than the debt limit increase. This is the only avenue I see right now to force the elected leadership of this country to solve our structural fiscal imbalance…

Just so we’re clear, I’m talking about real cuts and reforms—not these tricks and gimmicks that have given Washington a pass on grappling with its spending problem…

Previous Congresses have encountered lesser precipices with lower stakes and made a beeline for the closest lame-duck escape hatch. Let me put your mind at ease. This Congress will not follow that path, not if I have anything to do with it.

Democrats immediately fired back. White House spokesman Jay Carney called Boehner’s remarks as inviting brinkmanship similar to that last summer that resulted in an increase of the debt ceiling along with some future spending cuts. Said Carney: 

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$5 Trillion Tax Hike Coming

Barack Obama addressing a joint session of Con...

Back in February when the Congress voted to extend the payroll tax “holiday” to the end of the year, the Washington Post was the first to notice the tsunami of tax increases coming next year. But then Lori Montgomery began to add up all the other taxes that will increase on January 1, 2013, and called it “Taxmageddon.”

Here is a partial list of taxes that will increase unless Congress intervenes:

  • The 2001 and 2003 Bush “tax cuts” expire
  • Taxes on investment income
  • Estate and gift taxes
  • Income taxes
  • Marriage penalty returns
  • Child credit drops
  • Taxes on first $8700 of wages increase by 50 percent
  • Payroll taxes go from 4.2 percent back to 6.2 percent

But that is only a start. The Heritage Foundation did an in-depth analysis of all the tax increases scheduled for next year and found that Lori forgot some:

  • The Alternative Minimum Tax (AMT) will increase in size and reach
  • Five new Obamacare taxes will start
  • Some 50 “tax extenders” will go away
  • Small business owners can no longer write off business equipment purchases immediately

Adding them all together, the total is $500 billion. And that’s just in 2013. Over the next decade, the tax increases will exceed $5 trillion.

The effect of this tidal wave is already having a dampening effect on the economy. Curtis Dubay, the author of the Heritage study, wrote:

Families, businesses, and investors need to know how much tax they will pay in the future before making important economic decisions. The uncertainty caused by Taxmageddon means they are stuck in neutral while they wait for President Obama and Congress to act. This is slowing job creation and stopping many of the millions of unemployed Americans from going back to work.

Sucking half a trillion dollars out of the economy is going to have a severe negative impact on growth. Mark Zandi of Moody’s Analytics estimates that the nation’s GDP (Gross Domestic Product) would be reduced by at least

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.
Copyright © 2020 Bob Adelmann