Taxes, the Deficit/Debt, and the Fiscal Cliff

[HeloDude]

Since it appears most of the 'Election 2012' thread has run its course, I thought I'd start a new one that discusses taxes and the fiscal situation that country currently faces--being that this is now front and center and the results will affect almost all of us.

It seems that something will be done soon concerning the tax code (unless Congress allows the all the tax cuts to expire for everyone), so what are the thoughts on what will actually happen, what should happen, and what the consequences will be?

My thoughts are that the House GOP will cave to some degree and will allow tax rates to increase. If I were them, I would make a deal that the 'tax rates can go up for 5 years and then they will return to their current rate for another 5 years...unless the GDP average in those first 5 years is at least an average of 3.5%, the unemployment rate average would be 6.5% or lower, etc'...just an example. If raising taxes on rich truly creates growth and jobs, then let the Dems stand on it by agreeing to put in 'triggers' for the deal.

Also, when I hear from the left that the rich needs to 'pay their fair share'--the question I have is: What is their fair share? Check this out:

As matters stand, the top 1 percent of American households paid 39 percent of income taxes in 2009, according to the most recent data compiled by the Congressional Budget Office, and the top 5 percent of taxpayers paid 64 percent.

But income taxes, taken in isolation, do not tell the whole story, because lower-income Americans do pay payroll taxes. But even taking into account all forms of taxation, the top 1 percent still paid 22 percent of federal taxes while earning just 13.4 percent of household income. The top 5 percent paid 40 percent of all federal taxes, despite earning only 26 percent of all income.

Let the debate begin!

Oh, and please leave the 'religious' part out of it, ie 'as a Christian country we should do X'. I can't stand it when the Dems like Pelosi, Reid, and Obama use the Bible or whatever religious sentiment to support raising taxes to give entitlements to the poor and then support aborting a 5 month fetus that has a heartbeat or forcing Catholic institutions to pay for insurance programs that cover BS. It's as bad as the GOP saying they support 'freedom' and 'personal responsibility' and then discussing things such as a Constitutional Amendment banning gay marriage, passing anti-gun bills, etc.

[Vertigo]

Just curious if the article you quoted is counting capitol gains as income or if it is just using wages.

[HeloDude]

Just curious if the article you quoted is counting capitol gains as income or if it is just using wages.

My assumption is that it is counting both regular income and investment earnings...if it were only looking it at income, I would think that it would be even more when you include taxes on capital gains, as much more wealthy people pay taxes on capital gains compared to lower income people who have less investments.

[Danny Noonin]

Oh, and please leave the 'religious' part out of it, ie 'as a Christian country we should do X'. I can't stand it when the Dems like Pelosi, Reid, and Obama use the Bible or whatever religious sentiment to support raising taxes to give entitlements to the poor and then support aborting a 5 month fetus that has a heartbeat or forcing Catholic institutions to pay for insurance programs that cover BS.

So....everyone except for you has to leave the "religious part" out of it?

[Spartacus]

I'm not going to dive into the weeds concerning this argument yet. What I do want to say is that the Dems are in a much stronger position than the Republicans on this one. It should be obvious by now that I am a strong conservative, but I think the Tea Party is one of the biggest factors that should be blamed for this one. Their almost total inability to compromise and their extreme stances didn't help anything. (Yeah, I know almost everyone wouldn't compromise either.) The Dems don't really need to compromise on anything with this and they will still come out looking great. If there is a deal they will almost for sure get some tax increases, which is exactly what they want. If there is no deal and we go off the fiscal cliff then they still get a lot of what they want and will be able to point at the Republicans as not being willing to compromise AGAIN. I think the country is sick and tired of the politicians not being willing to compromise for the greater good and the Republicans will need to come to the table hat in hand willing to swallow their pride. That is the position that they are in right now and if they don't do that and we go off the cliff then good luck with that one.

[HeloDude]

So....everyone except for you has to leave the "religious part" out of it?

I was giving an example how both sides say they stand for 'X principles', but in reality, they do not--they only pick and chose what and where they see fit. And the Dems (take Nsplayr for example) bring up Christianity when trying to say how redistribution of wealth in the form of entitlements is a good thing because of religious morals, etc.

I think a debate on fiscal issues is much stronger when leaving religious/emotional arguments out of the argument. I know atheists who are very liberal and who want to increase entitlement spending, and I know atheists who are fiscally conservative and believe we shouldn't throw money we don't have at local, social problems. Most people have an opinion on the subject....even those people who have no religion at all. So if you keep religion out of it, then everybody can join the debate in the same fashion. Just my thoughts...

[HeloDude]

Once again Nsplayr, we're talking about taxes on the national level..please stick to the topic.

Field is IFR, state intentions.

[HeloDude]

That was a foul on me previously for assuming you were a Christian and were basing your views in part on Christian values. That's not the case and has been debriefed previously don't confuse everyone else.

It was a foul on you for bringing religion into the debate.

Unless you want to discuss how there are many Christians who don't support abortion, gay marriage, etc and how you are now against those things? If so, we can start another thread for that debate.

Stick to the issues without pulling in your religion or you'll get called out on it every time.

[HeloDude]

Then you're talking about the wrong thing purposely in order to bolster your position. If you say "well let's just limit this to federal income taxes" you're missing the bigger picture because your average man does not care whether that tax is on gasoline or cigaretts or his local property tax or payroll taxes or the check he may have to write to Uncle Sam in the springtime. Taxes are taxes and if we're gonna have a tax debate we should look at the entirety of who is paying what and to whom.

I mean, let's narrow it down even further...why aren't the poor paying their "fair share" of capital gains taxes either! I mean, they get to pay a lower rate, that's just not right when the rich are paying the vast majority of capital gains taxes.../sarcsm

Part of having a real debate means you don't get to frame the argument just so simply because you started the thread. If you wanna talk about taxes, great, let's talk about taxes. If all you want to do is talk about federal income tax rates divorced from any other policy issue then count me out.

Dude, I think it's pretty apparent that we're talking about taxes and the debt/deficit on the national level, hence 'the fiscal cliff' in the thread title ...not at the state and local level. Unless you want to bring into the debate 50 different state tax codes, all local tax codes, property taxes, etc. When I turn on the TV, I don't hear too many people debating state and local taxes.

That's like having a discussion about the NFL and bringing college football into the discussion. Of course college football indirectly affects the NFL, but people usually discuss those differently.

I know you lose a lot of your argument with the chart you posted when you take out local sales taxes, etc...but I am not aware of Congress debating the tax code in terms of local sales taxes. Now if you want to discuss federal income tax discussions and how that relates to local property taxes, then you have an argument.

I mean, we've had good debates in the past, are you trying to piss me off here or what? Let it be man, let it be.

Fair enough man...I was using as a past example. My bad.

[bronxbomber252]

I think that on this issue you can farily do some framing so long as it is not too specific. For example, you can limit it to takes on income including all levels of income tax, capital gains tax, and such (without including sales tax and such). But to limit it strictly to federal income tax, or capital gains tax, etc... is too narrow.

[Spartacus]

Congress isn't debating everything because they can't control everything. My point, however, is that total tax burden should be considered when debating the merits of who pays what. It unfairly frames the debate when you can say "well, the poor pay almost no federal income tax!" That's true, but they pay a disproportionate amount of other taxes as a percentage of their income, so maybe federal tax burden shouldn't be the only thing we're considering.

My position that the tax code isn't progressive enough is based on looking at total tax burden. The federal income tax system is progressive, but not enough so to offset other taxes paid. Therefore, within the context of things Congress can control, I was to see higher federal income taxes on the wealthy relative to everyone else because the way we have it now, the total tax burden is almost completely flat from the very bottom all the way to the very top and to me that's not good public policy.

Not that I think our current system is the best way to do it at all...I'm all ears for a simplified system that increases progressivity.

I find it ironic that the liberals believe these things but then turn around and institute policies that make it even worse for the poor. How much have gas and food prices risen since Obama took office? His policies have helped to make those prices go up. I also find it ironic that there seems to be a correlation between his policies and corporations' unwillingness to grow and hire more workers. They are all afraid to grow because they don't know if they could make it under this administration. Look at what Obamacare has already done to a lot of jobs? Immediately after Obama was reelected look at how many business started announcing layoffs and cuts to their full-time workforce in exchange for more part-time workers. Aren't things like this disproportionately affecting the poor? Taxes aside if we had policies that encouraged business growth and didn't penalize businesses as much wouldn't a lot of this be negated and we would have less of a revenue problem?

[HeloDude]

Do you want to put this in the election thread? Not that it matters much...the election is over and Obama was reelected. Obviously I disagree with your premise here but it doesn't really matter. And it doesn't really have much to do with this thread either.

You are correct--election is over.

So tell me...what do you think will happen with the 'fiscal cliff'? Do you think the top rates will rise? If so, by how much? And what should the rates be (including capital gains, dividends, etc)? Do you think sequestration will go forward?

I don't see how they even come close to cutting the deficit in half without gutting defense spending, even if Obama only raises rates on those earning $200+, it wouldn't be enough. The economy would need to see a pretty big growth increase (with increased amount of jobs) for enough revenue to come in to pay for all the spending he wants to have.

And looking at jobless claim numbers on the rise this past month, I don't see how you can create more jobs (to offset requiring over 100K jobs a month just to keep the unemployment rate steady) with all the higher taxes coming down.

[Spartacus]

Do you want to put this in the election thread? Not that it matters much...the election is over and Obama was reelected. Obviously I disagree with your premise here but it doesn't really matter. And it doesn't really have much to do with this thread either.

Hhmmm. Point taken, but I do think that it is relevant to the discussion. In any case I think the best thing for the country right now would be a compromise. Obama and the Dems think they have a mandate, (I disagree), and the Republicans are going to have to give some on this thing. I say let the Dems have their tax increase on the wealthy because that is probably the only way we are going to get a deal. This way we can hopefully pass a budget sometime during the year and if all of this goes south the Dems will "own" the situation because they got what they wanted. If it turns out good and the economy gets better then great.

[Prozac]

Hhmmm. Point taken, but I do think that it is relevant to the discussion. In any case I think the best thing for the country right now would be a compromise. Obama and the Dems think they have a mandate, (I disagree), and the Republicans are going to have to give some on this thing. I say let the Dems have their tax increase on the wealthy because that is probably the only way we are going to get a deal. This way we can hopefully pass a budget sometime during the year and if all of this goes south the Dems will "own" the situation because they got what they wanted. If it turns out good and the economy gets better then great.

I think the Dems would be wise to consider the whole 'Mandate' thing carefully. It bit the Republicans in the ass a couple years ago. I agree that everyone needs to compromise. This country is very much divided and if the Dems strong-arm their agenda you may see another swing at the midterms. That said, the Republicans will have to give up more than they were willing to a few months ago. I believe they will, as they've realized they're not going to help their image by digging in their heels on this one.

[Guest]

My position that the tax code isn't progressive enough is based on looking at total tax burden. The federal income tax system is progressive, but not enough so to offset other taxes paid. Therefore, within the context of things Congress can control, I was to see higher federal income taxes on the wealthy relative to everyone else because the way we have it now, the total tax burden is almost completely flat from the very bottom all the way to the very top and to me that's not good public policy.

You want Congress to enact an income tax code that compensates for state income and sales tax differences across the county?

Seriously? C'mon man.

How can you be expected to be taken seriously when you say stuff like this?

[Spartacus]

Well if I were king for a day we'd have one unified system that was truly progressive; problem solved. The more realistic answer is that if you increase federal income taxes on top earners and it makes the total tax system more progressive on average, it's still a step in the right direction. The fact that that would affect people differently depending on which state they live in is a given in our current system rather you're raising or cutting taxes so there's nothing you can really do about that unless you have one single system for the whole country. So short answer, more average progressivity, good.

= more federal government power and less power at the state level. Edited November 26, 2012 by Spartacus

[HeloDude]

....so I guess the bigger point is I want a system that does a better job at reducing inequality.

So what exactly does this mean? What does 'reducing inequality' equate to? Should we collect all the money and income from every person in this county and then divide it up proportionally to population? We already spend nearly $700 Billion a year on welfare at the federal level...how much more should we spend? Should the federal government ensure that everyone has free housing, free food, free healthcare (ok, we now have that one so we can check that off of the list), free college education, free transportation, free clothes...?

But ok...you are king for a day (more like a dictator, but I digress)...what are the new tax rates? List them out--I need to understand what a 'progressive tax code that reduces inequality' looks like. I'm curious as to what I would be taxed at on the federal level with your utopian plan.

[Spartacus]

Exactly.

You've never spent any amount of time in a socialist country have you?

[Spartacus]

I'd like to have one of these that decreases this. I'm also well aware that the first goal is likely never to happen in the United States and that the second is a difficult thing to do if everyone agrees inequality is a bad thing, which in this country we're still litigating that.

Dude, you scare me.

On another note look at what is already happening: https://www.foxnews.com/politics/2012/11/25/more-congressional-republicans-break-tax-pledge-for-sake-looming-fiscal-crisis/

The thing that bothers me about closing loopholes like charitable deductions and mortgage insurance is that those things will likely reach out and touch a lot more than those who make over $250,000 a year.

[Right Seat Driver]

None of this shit matters anyway. The world is ending in a few weeks.

[HeloDude]

I'd like to have one of these that decreases this. I'm also well aware that the first goal is likely never to happen in the United States and that the second is a difficult thing to do if everyone agrees inequality is a bad thing, which in this country we're still litigating that.

Got it...you want a more socialist type country and do not believe in States' Rights. It's cool dude, we even have a sitting Senator who is a self-proclaimed socialist.

But you still didn't answer most of my direct questions:

Should we collect all the money and income from every person in this county and then divide it up proportionally to population? We already spend nearly $700 Billion a year on welfare at the federal level...how much more should we spend? Should the federal government ensure that everyone has free housing, free food, free healthcare (ok, we now have that one so we can check that off of the list), free college education, free transportation, free clothes...?

But ok...you are king for a day (more like a dictator, but I digress)...what are the new tax rates? List them out--I need to understand what a 'progressive tax code that reduces inequality' looks like. I'm curious as to what I would be taxed at on the federal level with your utopian plan.

More than anything, I want to know if you believe everybody in the US is entitled to the exact same things--automobiles, housing, same education, food, etc?

Also, if you were a Congressman and you were able to put in your $.02 on writing new federal tax rates, what would they be? What rate would someone making $75-100K pay? 100-200K?, 200K+?

[Fuzz]

Well here's what the tax rates will look like next year if the Bush tax cuts aren't extended...funny what was that whole "if you make less than 250K your taxes won't increase"? Looks like mine is going up $2,000 next year.

https://taxfoundation.org/article/how-would-fiscal-cliff-affect-typical-families-each-state

Tax comparison calculator:

https://interactive.taxfoundation.org/taxcalc/?filingStatus=SNG&dependentsUnder17=0&dependents17Plus=0&wagesHead=0&wagesSpouse=0&dependentsInCollege=0&inCollege=no&tuitionExpenses=0&capGainsShort=0&capGainsLong=0&dvds=0&ssBenefits=0&otherIncome=0&stateLocalIncomeTax=0&realEstateTaxes=0&charitableContributions=0&otherItemizedDeductions=0&childCareExpenses=0&head65OrOver=no&spouse65OrOver=no&qualifiedDividends=0&selfEmploymentIncome=0&otherInvestmentIncome=0&otherAdjustments=0&foreignTaxes=0&employerHealthIns=0&deductionsForceMode=useBest&smoothOrAccurate=accurate&nS=2&cNI=3&sc0n=user_scenario_0&sc0t=2011_Law&sc0d=undefined&sc0y=2011&sc0enb=2011AMTPatch_BushTaxCutsExt2010_PayrollCut2010&sc1n=user_scenario_1&sc1t=Fiscal_Cliff_2013&sc1d=undefined&sc1y=2013&sc1enb=PPACA&hide=advanced&cust=1&chg=1#calculator

[Spartacus]

Really, scary? Don't worry, I'm 99.69% positive we'll continue to have a federalist system in the United States for the forseeble future.

It does scare me that you would want to change something that was unique and bold and has worked so well up to this point that a lot of countries in the world have patterned their own constitutions after ours and our system of government. We are the nation that we are because of this system and I think we have gotten too comfortable and apathetic to understand what we really have.

Good news all around...I'd much rather Senators do what they think is right for their constituents and for the country rather than be beholden to various pledges, oaths, and promises that they've made. Better not to sign such pledges and oaths and to keep your promises realistic and achievable, but maybe that's asking too much. Don't abandon your principles, but don't outsource them to a some outside person or organization either.

I think we actually agree here.

I'm pretty sure they're talking about capping deductions for those making over $250K in order to raise more revenue from that subset of tax payers (a Democratic goal) without necessarily raising rates on them (a GOP red-line). It's a compromise where Republicans don't have to vote for a rate increase but Democrats get the increase in revenue they seek.

Discussions of capping deductions for everyone or changing rates for everyone is part of a larger tax reform debate that I think is a little farther down the road than the fiscal cliff discussions. I'd pretty much bet there's no way the lame duck Congress has the time nor the desire to massively reform our tax system before the end of the year. Hopefully they'll figure out the fiscal cliff short-term problems in a way that is a down-payment both in money and good will toward a bigger deal on reforming the tax system in the new Congress next year.

I see what you are saying here and your statement is logical but I think there will be bleed over sooner or later if not right away. I tend to not trust what the government tells me about taxes etc. If they tell me that it won't affect me now that's great but what about in a couple of years? The government will always grab power but it seldom if ever gives it up. I would apply this idea to taxation as well.

Edited November 26, 2012 by Spartacus

[Fuzz]

What you're quoting I'm assuming is a campaign promise from Obama. So you have to consider what he actually wants to achieve, not just what is possible if nothing gets done. He's advocating leaving rates the same as they are now for those making less than $250K, so if he achieves what he desires, the campaign promise will be fulfilled. The President also basically caved in 2010 and extended the current rates for all earners in order to maintain that campaign pledge since he couldn't secure his desired increase for top earners without letting them all expire. I doubt that will happen again since the political situation is much different, but even if you look to the past 4 years that promise from 2008 has been kept.

There are very, very few people, especially on Capitol Hill, who want to let the Bush tax cuts expire on all earners for any length of time. Some advocate for "going over the cliff" for a week or two so then everyone can vote for "tax cuts" to basically restore the rates we've had for the last decade but that's more of a parlor trick than actually wanting to see higher rates.

Sooo...do you really expect that nothing will get done and all parties will just agree to disagree, sending your rates back up for an extended period of time? I think that is actually the least likely option, but in that case pretty much every politician in Washington will have broken a campaign promise.

Call me cynical but I think there will be people on both sides of the aisle that hold the process at deadlock. What I want to see before we talk about taxes and revenue is spending cuts and a damn BUDGET, agree on what needs to be spent/cut then talk about raising taxes/revenue. I'm not completely against talking about taxes but the government has shown that it all it does with more money is spend more.

[BADFNZ]

Here's my solution:

1. Let Bush tax cuts expire or raise income taxes in some other way. A 1% increase would increase tax revenue by ~$500B. People that think we can get out of this hole only by reducing spending are fucked in the head. We have to increase revenue as well. And I don't want to hear the argument of increased taxes means smaller economy due to less spending. Would anyone's life here change if your income tax went up 1%?

2. Slowly raise the age at which we collect social security and medicare. I know this won't be popular, but I think it needs to be done. We are living a lot longer today so collecting at 65 now is like collecting at 55 back in the 1930s. These two entitlement programs will take 92 cents of every government dollar spent in 2019. If we don't make changes to SS/Medicare now, we're fucked.

3. Cut BS government spending. Anything that does not directly benefit the well-being of Americans should be cut. Not one dime of tax payer money should go to the fucking arts.

Let the spears fly.