Republicans Cave On Fiscal Cliff Deal, Taxes Going Up For 77% of Americans
The Bozos in Washington finally cut a deal to avoid “The Fiscal Cliff”, a combination in across the board tax hikes and mandatory spending cuts scheduled to go in effect January 1,2013. Of course, the agreement was passed by the house at 11:00 on January 1 so technically we did briefly go over the cliff. One nasty surprise that will hit all wage earners is the 2% increase in Social Security payroll taxes. So, when you hear your congressional leaders say that they didn’t raise taxes on 99% of Americans, you know they are liars.
Although President Obama campaigned on a “balanced” approach to avoiding the cliff, the final deal has little in the way of spending cuts and raises taxes on 77% of Americans. For every $41 in increased taxes there is only $1 in spending cuts. Washington politicians (except House Tea Party Republicans) have little appetite to take on meaningful spending cuts such as entitlement reform. We will continue to have $ 1 trillion plus deficits for many years to come and our debt will grow to unsustainable levels.
The next battle royale will be the raising of the debt ceiling. Treasury Secretary Tim Geithner notified Congress that we would hit the debt ceiling on December 31, 2012. Using accounting gimmicks, the Treasury can still pay it’s bills and go further in debt for at least another few weeks. The last time we had the debate on raising the debt ceiling in the summer of 2011 Standard & Poors lowered the country’s credit rating from AAA to AA+. I would not be surprised if it happened again after this fight.
The country is on the path to financial ruin and there is no stopping it. Congress will continue to spend money we have to borrow and The Federal Reserve will continue it’s massive money creation to finance our deficit. This will ultimately will lead to the collapse of the dollar and inflation like no American has seen in their lifetime. This is incredibly bullish for gold and silver and both are up big today.
So what is in this 157 page bill?
Here is the major things:
Tax brackets – Tax rates will remain where they have been since the Bush tax cuts for everyone who has taxable income less than $450,000 married, $400,000 single. If you earn more than your maximum tax rate goes from 35% to 39.6%. Clinton era caps on itemized deductions and phase-out of personal exemptions for individuals making more than $250,000 and Married $300,000 are extended.
Capital Gains & Dividends – Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15 percent to 20 percent.
Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation. This will prevent over 30 million middle and upper income taxpayers from being hit $3,000 in additional taxes.
Child Tax Credit– Is extended for five years at past amounts. The credit is $1,000 per child, it was scheduled to drop to $500.
Medicare Reimbursement to Doctors – Blocks a 27 percent cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula.
Social Security payroll tax cut: Allows a 2-percentage-point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2 percent. This is a big one that will hit anyone who earns a paycheck regardless of how much you make. A couple of years ago the payroll tax was decreased by 2% to 4.2% to help stimulate the economy, I guess the economy is doing so well we don’t need that extra stimulus. Most Americans will be surprised when they get their first paycheck in 2013 and see 2% less.
Unemployment Benefits – Extends unemployment benefits for one year for the long-term unemployed.
Spending Cuts – Sequestration, the mandate that government make massive cuts in the Pentagon and domestic agencies is delayed for two months so Congress can figure a way to not make any spending cuts. Another kick the can move.
Estate Taxes – The current 5 million dollar estate tax exemption. But that cap is indexed to inflation, meaning it will increase every year. This is a very good part of the deal as we can finally do estate planning knowing what the rules are.
Of course, any bill coming out of Congress is stuffed with goodies for constituents like tax breaks for Hollywood and tax credits for buying hybrid cars.. Why do you think the bill is 157 pages long? Read the entire bill here: