Monday, December 31, 2012
The Latest OnThe Fiscal Cliff - And The Real Tax Horrors To Come You're Not Hearing About
The fiscal cliff negotiations are going down to the wire, and the word in Washington is that the outlines of a deal have been struck, although President Obama took a stab at sabotaging it.
House Majority Leader John Boehner isn't even involved in this one. After Senate Majority Leader Harry Reid told Boehner the Senate wasn't even going to discuss anything the House came up with and derisively sent the Senate home, Boehner threw up his hands and said that the House would wait for the Senate to act.
It's fairly well known in DC that Minority Leader Mitch McConnell and Majority Leader Harry Reid are not exactly on good terms to put it mildly, something fairly rare in the collegial Senate club even in these fairly partisan times. A huge problem in any negotiations has been simply getting Reid to deign to sit down with McConnell, as you can imagine.
So a great deal of the progress that's been made behind the scenes has been between McConnell and Vice President Biden, who served together in the Senate for years.
The tentative deal right now would raise tax rates to to 39.6 percent from the current 35 percent on family incomes over $450,000, $400,000 for individuals per year. This is yet another penalty for married couples, since if you live with your partner sans marriage the two of you have a threshold of $800,000 combined for your household.
It will also fix the Alternative Minimum Tax glitch from expanding to affect an estimated 28 million households for the first time in 2013, with an average increase of more than $3,000. And it increase the estate tax rate on estates valued over $5 million to 40 percent(!) and extend unemployment benefits for one year.The Democrats also reportedly agreed stop, for now, a 27 percent cut in fees for doctors who treat Medicare patients mandated under ObamaCare.
Where they're still deadlocked is on spending cuts. And how to pay for things like the unemployment extension, the AMT fix and the Medicare fix.
The sequestration deal McConnell foolishly agreed to calls for around Still left outstanding is how Congress will modify the $109 billion in automatic spending cuts set to take effect in the new year. President Obama and the Democrats want no spending cuts at all for a full year, and want to just pay for it with a combination of new taxes and later spending cuts where they prefer them to be, like defense.
McConnell wants to vote on the tax deal immediately to avoid the fiscal cliff and try later to reverse the automatic spending cuts in a separate deal.
That's not how Senate Democrats and the White House want it. They want an agreement covering everything now.
Still, it looked fairly promising until President Obama decided to do what he usually does in these situations...make a speech. He was not in a good mood, perhaps because for appearances he had to cut short his Hawaiian vacation.
The president slammed Congress for not getting things done faster, and made angry remarks about the emerging deal, which would net $600 billion in new taxes, or 'revenues' as Democrats like to call them.The President wanted $1.3 trillion, saying:
"I have to say that ever since I took office, throughout the campaign, and through the last couple of months, my preference would have been to solve all these problems in the context of a larger agreement.
"A bigger deal, a grand bargain, whatever you want to call it--that solves our deficit problems in a balanced and responsible way that doesn't just deal with the taxes but deals with the spending in a balanced way so that we can put all this behind us and just focus on growing our economy."
"But with this Congress that was obviously a little too much to hope for at this time," said Obama.
Obama mainly blamed Republicans. "Republicans in Congress said they would never agree to raise tax rates on the wealthiest Americans," he said, laying the blame on Republicans.
"Now, if Republicans think that I will finish the job of deficit reduction through spending cuts alone — and you hear that sometimes coming from them ... then they've got another think coming. ... That's not how it's going to work at least as long as I'm president," he said.
"And I'm going to be president for the next four years, I think," he added.
Exactly the kind of tone you want to take during a delicate negotiation, no? And needless to say, Republicans in the House and Senate didn't react well, especially as this was a signal that whatever happens now, President Obama is going to fight any future spending cuts tooth and nail.
This drama is entertaining, but hardly scratches the surface of the real tax horrors Americans will face that aren't even being debated, because regardless of what happens or doesn't happen with the fiscal cliff, Americans are going to be facing a one trillion Obamacare tax hike.And the president knows it.
There are five major ObamaCare taxes coming into effect January 1st that are definitely going to affect most of us:
1) There's the ObamaCare Medical device tax, a a new 2.3 percent excise tax on gross sales. Do you or your loved ones use or need a wheelchair, a hearing aid, walker, a stent, eyeglasses, an artificial hip or a prostheses or literally anything that comes under this category? Your healthcare costs are going up.
2)There are between 30 and 35 Americans who use a pre-tax Flexible Spending Account (FSA)to pay for anticipated medical expenses, say for a handicapped or ill spouse or child. No more. Thanks to ObamaCare, the new ceiling on these accounts is a measly $2,500, which won't exactly buy you very much at today's healthcare costs.
3)Brand new ObamaCare surtaxes on all investment income. Capital Gains is climbing from 15% to 23.8%, Dividends from 15% to a whopping 43.4%, and other investment income (zero coupons, etc.) from 35.4% to 43.4%. If you're a retiree living off your investments, you are going to be hosed royally.
4)ObamaCare's new limits on medical itemized deductions. It used to be that you could deduct all medical expenses not paid for by your insurance that exceeded 7.5 percent of adjusted gross income (AGI).
President Obama and his friends didn't cut it out, they simply made it relatively useless.The new 'haircut' establishes a threshold of 10 percent of AGI, which means a lot of people are going to have to just eat medical expenses they used to be able to deduct.
5) I saved the best for last, the wonderful ObamaCare Medicare payroll tax hike. It was 1.45% for both employer and employee on the first $200,000 of wage income, $250,000 for a married couple.If you were self employed and owned your own business, it went up to 2.9%.It stayed the same no matter how much you made.
The new ObamaCare law hits anything over a $200/250K threshhold with a 2.35% hit if you're an employee, and if your self-employed it goers up to 3.8%.
These taxes are going to slap you upside the wallet regardless of what happens in Washington. And that's in addition to your other federal income taxes, local sales taxes, state taxes, excise taxes on things like gasoline, county property and service taxes and in some jurisdictions, local city tax.
Obviously, the media isn't pushing this, and the president certainly isn't with his cynical rants about 'trying to help to middle class'. What he and the Democrats are doing is helping themselves to your wallet.
Ummm, Happy New Year, I think.This is the change you voted for, America, and change is what a lot of you are going have to scramble for when this president and his friends are through with you.