Fools, Knaves & Other Republicans - The Fiscal Cliff

At the 11th hour, Senate Republicans voted on a 157 page bill that they hadn't read, all in a rush to avert a tax increase to Clinton-era levels on everyone. The terms of the bill, at least according to the summary put forth by WaPo:

-Tax rates will permanently rise to Clinton-era levels for families with income above $450,000 and individuals above $400,000. all income below the threshold will permanently be taxed at Bush-era rates.

—The tax on capital gains and dividends will be permanently set at 20 percent for those with income above the $450,000/$400,000 threshold. It remain at 15 percent for everyone else.

—The estate tax will be set at 40 percent for those at the $450,000/$400,000 threshold, with a $5 million exemption. That threshold will be indexed to inflation, as a concession to Republicans and some Democrats to rural areas like Sen. Max Baucus (D-Mt.).

—The sequester will be delayed for two months. Half of the delay will be offset by discretionary cuts, spilt between defense and non-defense. The other half will be offset revenue raised by the voluntary transfer of traditional IRAs to Roth IRAs, which would tax retirement savings when they’re moved over.

—The Alternative Minimum Tax will be permanently patched to avoid raising taxes on the middle-class.

—The deal will not address the debt-ceiling, and the payroll tax holiday will be allowed to expire.

—Two limits on tax exemptions and deductions for higher-income Americans will be reimposed: Personal Exemption Phaseout (PEP) will be set at $250,000 and the itemized deduction limitation (Pease) kicks in at $300,000.

So what will the new tax structure look like, between the Senate Bill and Obamacare:

Would that that were all in this crap sandwich - but to add true insult to injury, Senate Republicans agreed to allow some of the most egregious tax give aways as part of the bill. Specifically, the "wind tax credit survived (cost: $12.1 billion), and so did the tax breaks for cellulosic ethanol ($59 million) and the impoverished producers of Hollywood ($248 million)." Spending is truly threatening the health of our nation, and these give aways should be at the top of the list of cuts. Instead, Republicans vote for a deal that includes them. These idiots do not represent the interests of the conservative side of the aisle.

This 'deal' was virtually all about raising taxes. "According to the Congressional Budget Office, the last-minute fiscal cliff deal . . . cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts."

The tax increases "on the rich," including earned income, capital gains and the death tax are pure class warfare. As such, they are a symbolic victory for the progressive left, but are also large enough that they will have practical effect. The increases raise less revenue than projected and, more importantly, they will reduce our already anemic growth both by lessening capital in the private sector, and in particular, reducing it amongst the class that we rely upon to create businesses and jobs. And with the 2012 reelection of Obama and a Democrat controlled Senate, they were inevitable. This is the Dem plan to tax us to prosperity.

There has not yet been a principled Republican response. Instead, we have a fractured, frantic and seemingly leaderless Republican caucus that is scrambling to accept a deal on wholly Democrat terms. This is just sad.

Thomas Sowell, in his most recent column, opined that Republicans deserved to lose the 2012 election. Professing his mystification at how Republicans "can keep repeating the same mistakes for decades on end" he identifies the problem as a Republican establishment that "still goes for pragmatic moderates who feed pablum to the public, instead of treating them like adults." Then he gets to the heart of it all:

It is not just Republican presidential candidates who cannot be bothered to articulate a coherent argument, instead of ad hoc talking points. Have you yet heard House Speaker John Boehner take the time to spell out why Barack Obama’s argument for taxing “millionaires and billionaires” is wrong?

It is not a complicated argument. Moreover, it is an argument that has been articulated many times in plain English by conservative talk-show hosts and by others in print. It has nothing to do with being worried about the fate of millionaires or billionaires, who can undoubtedly take care of themselves.

What we all should be worried about are high tax rates driving American investments overseas, when there are millions of Americans who could use the jobs that those investments would create at home.

Yet Obama has been allowed to get away with the emotional argument that the rich can easily afford to pay more, as if that is the issue. But it will be the issue if no one says otherwise.

Tweet

Read More...

Summary only...

What Is Wrong With Republicans???

Who didn't watch with amusement yesterday as Republicans refused to vote for Boehner's bill to make permanent the Bush era tax cuts for all Americans earning less than $1 million per year. It would seem that the Keystone Cops are alive and well in the Republican wing of Congress. As Gerard van der Luen of American Digest is wont to say, "Republicans, they thirst for death."

Republicans have precisely zero leverage on tax rates. Come January 1, all of the Bush era tax cuts expire and all the tax rates will go up automatically - and quite unfairly, Republicans will get the blame. Moreover, the centerpiece of Obama's tax plan was to raise tax rates on "the rich." It is time to give the people what they voted for. If four years of gross economic incompetency wasn't enough to convince the electorate, well, let's let them have the next four years good and hard indeed. Obviously, more lessons are needed.

In this instance, Republicans prepared to die on the hill of stopping higher taxes is much like Picket's charge - a suicidal act that did nothing beyond sealing the doom of Lee's Army of the Potomac. One of the first rules of warfare - don't reinforce failure, reinforce success - or at least where you have the greatest likelihood of success.

Where House Republicans hold absolute power is on spending. Give Obama whatever tax increase he wants, but then shut down the government over the budget ceiling. Moreover, refuse to pass anything but a life support budget until all sides agree on - and pass into law - a grand bargain that in real terms, sans the usual accounting gimmicks, will decrease the debt by 25% over the next four years.

Debt is where the real issue lies. Sure, Obama's tax increases will hurt the economy - but they won't kill it. Our continued accumulation of debt will. Between Obama's world record profligate spending and Fed Chairmen Ben Bernanke, who is keeping our printing presses spinning at a record pace, they are placing our nation in mortal peril. Obama and Bernanke are setting the stage for runaway inflation and the devaluation of the dollar. That is where Republicans need to draw the line in the sand - this far, and no further.

Tweet

Read More...

Summary only...

A Republican Strategy That Does Not Involve Party Suicide

Obama is set to severely damage our economy - and that is even if Republicans are able to minimize the damage he is set to inflict between tax increases, Obamacare, Dodd Frank, the EPA, and world record profligate spending. In the first four years under Obama, the median net worth of Americans declined 47%, with the middle class hardest hit. Obama's class warfare and redistributionist policies virtually insure that the next four years will only make our dire situation worse.

Republicans should have four goals over the next four years. One, make the economically incompetent Obama and the left own the economy. Theirs is a bankrupt ideology, and they are now at the point of bankrupting our nation. Two, don't let the left do anything else that cannot be undone by simple majority vote. Three, don't let Obama spend us into a hole so deep we become Greece. And lastly, stop Obama from ruling our nation extra-constitutionally.

In January, the Bush Tax Cuts (for the wealthy, don't you know) are set to expire and the Obamacare taxes are set to kick in. To itemize:

- 35% income tax bracket increases to 39.6%

- 33% income tax bracket increases to to 36%

- 25% income tax bracket increases to to 28%

- 28% income tax bracket increases to to 31%

- 10% income tax bracket would be eliminated

- 0% long term capital gains tax would increase to 10% for low income filers

- 15$ long term capital gains tax would increase to 20% for high income filers

- 2.9% Medicare payroll tax increases to 3.8% for people earning over $250k, and it would apply also to all investment income

- 4.2% SSI employee payroll tax increases to 6.2%

- 35% tax on estates over $5 million increases to 55% on estates over $1 million.

- The Alternative Minimum Tax, with no inflation adjustment, will now apply to 28 million taxpayers, about one in five tax payers mostly in blue states.

- Dividends, currently taxed as capital gains, would be subject to much higher tax as ordinary income.

- Health Flexible Spending Accounts limited to $2,500 per year.

- Threshold for deducting medical expenses rises from 7.5% to 10%

- Obamacare reduces payments to doctors and hospitals under Medicare by 27%, effectively gutting the program.

This is not even close to a comprehensive list. Our economy is set to tank, and the reality is that there is next to nothing Republicans can do about it - nor should they try, at least from the tax perspective. Americans knew Obama wanted to raise taxes when they voted for him. They are now getting the government they deserve - and they deserve to get it good and hard.

What Americans will soon learn is that you cannot punish business and expect the economy to grow, that no nation can tax itself to prosperity, and that taxing the rich will not improve the lot of the middle class in any respect. To the contrary, it will merely mean less money in the economy for private investment. They are hard lessons that need to be learned.

If Republicans hold the line and allow our nation to get to January 1 without anything passed legislatively to address the above, the left and the MSM, joined at the hip, will insure Republicans are blamed for all of the resulting problems. That would be catastrophic. Indeed, we are in the mess we are in large measure because the left and the MSM were able to convince people that the economic crash of four years ago, the one that THE LEFT CREATED, was the fault of some vague, unnamed Republican policies.

So what should Republicans do?

1) Pass a bill restoring the Bush era tax cuts for earners under $250,000 and send it to Obama. This will at least keep Republicans from being blamed when the economy inevitably tanks, and conversely it puts ownership of the economy squarely with Obama. There is nothing the right can do to stop any of the other tax increases, so stop trying. What we have is a spending problem; the taxes increases are just going to add to the misery. They may be the straw that breaks the proverbial camel's back, but its all the other straws we need to be worrying about at the moment.

2) Per Prof. Glen Reynolds, pass a bevy of tax increases aimed at ending sweetheart deals for far left constituencies, from Hollywood to far left foundations.

3) Draw a red line on spending. There is massive public support for across the board spending cuts. Give Obama his tax increases today, then call the President on his promise to cut spending. Require that he give the Republicans a plan to cut the deficit by 25% by the end of his term, and refuse to increase the borrowing authority until he does. That is one cliff we should go over.

4) Refuse to allow Obama to rule extra-constitutionally. For the last four years, when Obama has ruled extra-constitutionally, doing end arounds Congress, the Congress has moaned a little and done nothing. That needs to end. They need to shut down the government and go to the Supreme Court. Moreover, Republicans need to figure out how to force passage of the REINS Act - which would go a long way to redressing the Constitutional balance between the Congress, who are supposed to have ALL legislative authority, and the executive branch.

5) As to the rest of us non-elected types, per Bookworm Room, we need to take the spirit of Hanukkah to heart and start emulating the Maccabees.

Related:

Bill Kristol: A Critique of the WSJ's Advice For Congressional Republicans

Larry Kudlow at NRO: GOP's Strategic Retreat

Thomas Sowell: Capital Gains Taxes, and How Quantitative Easing Is Debasing The Value Of Our Currency

Ace of Spades: Ace doesn't agree with my strategy, which in part mirrors that of Sen. Corker

Legal Insurrection - Some Therapy From Rush For Conservatives Who Are Ready To Give Up

Tweet

Read More...

Summary only...