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Obama’s Middle Class Tax Scam
Yesterday the Prez put his proposal on the table about what to do with the Fiscal Cliff the country faces at the end of the year. What Obama said is important. What he didn’t say is critical.
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It should come as no surprise that Obama has proposed an extension of the Bush tax cuts for those workers earning $250,000 or less and a tax increase for those making above $250,000. The extension of the tax cut for those earning under $250k will have a cost of $150B according to the White House:
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The President’s proposal appears to be “tax progressive” in that it benefits workers on the middle to lower end of incomes. The plan is clearly designed to get some votes in the key political states of Ohio and Pennsylvania. Who knows? Maybe some suckers will actually cast a vote for Obama as they think he’s standing up for those on the lower rungs of the income profile. Baloney!
What the President didn’t say in his speech yesterday is far more important than what he did say. He did not say word one about the 2% Social Security tax break that has been on the books the past few years. What this means is that the FICA tax break is going to expire. When it does, every worker’s paycheck is going to get hit by 2%.
In the 2012 Social Security Trust Fund report to Congress the Trustees estimated that total FICA (SS taxes) would amount to $733.4B in 2013. The 2% increase in FICA taxes in 2013 will increase workers tax load by $120B. Therefore the combined effect of extending the sub-250k tax cut and the increase in FICA comes to a paltry $30B.
Even worse is the way in which the increase in FICA taxes will be felt by workers making $60K or less. (The average annual wage in the US is $42,000). Households in the lower tax brackets will not get much benefit from extending the Bush tax cuts, but they will, on average, see their take home pay reduced by $1,200 a year.
The President’s tax proposal is a half-assed compromise. It is not progressive. It does nothing for the economy ($30b is chump change). If workers earning an annual income close to the average understood how this tax proposal would work out for them, they would reject it. I find it interesting that Obama is selling his plan as a middle class tax cut that aids small businessmen when in fact it is a lower-income tax increase that has no beneficial consequences to the economy.
The President’s tax plan was just a show pony to get some votes. It does not have a snow ball’s chance in hell of passing. But it is a window into the real debate that will happen after November. Some form of compromise on the fiscal cliff will have to be reached. Some taxes will go up, others will stay where they are. The net effect will be that there is no real improvement in the deficit, nor will there be any meaningful stimulus to the economy from the fiscal side.
In other words, we are going to deeper into debt, and the economy will stink. I can’t see a way around that conclusion.
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***the higher the price, the lower the demand***
I'm afraid it's not as simple as that. The prices for some goods and services are elastic, some are inelastic. And the other poster is correct. If the demand for your product is increasing you will hire more workers to meet production demands, if it's isn't you won't. Taxes and regulations are a marginal consideration.
Taxes and regulations are a marginal consideration.
Henry, you make a great deal of sense. That's why I am surprised by this sentence. If the FICA tax reduction was a marginal consideration, why was it enacted? I believe the point was to put more purchasing power into the hands of the target group of people in a consequential, not inconsequential, way. When that tax reduction ceases, the money that was JQPublic's to spend will now not be his to spend. Less money to spend = less demand for products. Less demand for products = less demand for workers.
If the effect on purchases worked with taxes on the way down, the effect will also work with taxes on the way up. That could turn out to be inconsequential in the FICA tax increase case. But I think it is premature to state that it will be inconsequential now. I think that is what is being discussed here.
Actually I was referring to the effect of corporate taxes on business decisions.
Go one step more in your logic. The idea is that putting some extra money into consumers' and business's pockets will increase demand for products and services. The temp FDIC tax is just simple way to target where that extra spending money goes; more proportionally to those earning under the $110K SS limit, and to businesses.
http://news.yahoo.com/pa-mayor-cuts-city-workers-pay-minimum-wage-113312...
It's very possible public employees may be forced down to what the "doing well private sector" is making.
Children, long ago there was a group of people known as the "middle class" they had jobs and could make enough money to ----------------------------------------------------------
OBAMA LEMMINGS FOLLOWING HIS EVERY WORD!
Obama/Dems are Hollande-like tax crazy. Small businesses will get creamed and drive the employment situation to even worse levels.
http://confoundedinterest.wordpress.com/2012/07/10/small-business-optimism-falls-to-november-2011-level-taxes/
Gee, if we could just get another record tax cutter like Bush in there, the jobs would soar...what, not one private sector job created in two terms? Maybe the tax issue is way overblown?
Maybe the real issue is way too much debt and taxes are just a sideshow.
So, when is Krasting 's tee time with the Prez?
No chance, Bruce has been placed on the terrorist watch list
Next Sunday at Congressional CC. Me, the Big O, Geithner and Bernanke. I will kick their butts.
I wish.....
If Obama's plan were truly "tuned to his base" he would have said, "We cannot allow taxes to increase for the 50% of Americans who pay no income tax."
Taxes are going up whether Obama or Romney are elected. Each will spare their constituency in 2013, but afterwards taxes go up on everyone. Everyone that has an income. Ultimately: VAT.
Whenever politicians discuss taxes, it hurts my ears. No detail whatsoever and same problems continue on.
The FICA tax reduction was always temporary. It's clear SS going broke as it is...
agree.....and special thanks to Bruce for reminding us of the 2% FICA boost in 2013. He's the only guy I've seen or heard even mentioning it. It was way off my own radar too. Thanks again, Bruce !
That's what the statists will try! ... but spending needs to come down ... a looooong way! The end of the road of living beyond means has already been passed.
"Think of the children!" (for a change).
One thing's for sure... there's a lot of people barely treading water. Any tax increase in their bracket (if it comes) is going to brutally savage them. Especially if energy and food prices are making new highs.
I guess the FED will have to step in. My quess is that The FED & BaselIII will eliminate
margin requirements for soverigen debt freeing 1.4 trillion onto the market in search for
yields .. let the games begin. Obama is nothing more that a side show ..
it's all a scam. the whole sorry story, a scam, a racket, a wealth transferance mechanism, a wealth extraction machine, a fleecing, a highway robbery, theft, looting, scamming, scheming, thieving ...... but, then, i already said all that ! SO, what the hell we gonna do about it ! extricate yourselves ! close your damn bank accounts, those lucky enough to even have any bank accounts, stockpile everything, spend as little as possible, except to buy yourself a good gun & a bible & foodstuffs. i have had it, where is my cane & pitchfork ?
Correct. Fairtax (fairtax.org) would eliminate ALL OF THIS.
DEATH TO ALL BANKERS, POLITICIANS AND LAWYERS INVOLVED WITH ANYTHING THAT HAS TO DO WITH FINANCE, BANKING AND SUPPOSED REGULATION - WHICH IS A SORRY-ASSED JOKE.
TIME TO THIN THE HERD....BIG TIME
The herd will be thinned. There will be death;
however, this ainT no Hollywood flick:
The bad will win (live) and the good will lose (die).
Bankers, Politikers, Revenuers, etc have all purchased their ticket to Paradise. Did you reserve your seat on the Ark?
How sweet is that fairtax koolaid?
Very sweet...I support it too.
And I'll tel you why.
First and foremost, it removes politicians from screwing around with the "progressive tax code" EVERY YEAR.
Doling out favors and public treasury funds (the peoples tax money) like their candy, like some despotic monarch to the recipients...punishing others on his pure whim.
Secondly, everyone has skin in the game...no free riders. Everyone pays something...and it doesn't forget the less fortunate among us.
Don't disparage it till you read what it actually says.
I did read it, the actual proposed legislation. If you think it fixes anything, especially the tweaking, I'd love to know how you expect them to enforce it without evolving something just as damning as the irs. Thirty percent sales tax will never fly.
There are many tax proposals that would make a huge difference.
I have suggested some on this site (and other sites), but you will be shot down immediately since most people seem to want to pay no taxes at all.
The people who want to pay no taxes and are against any entitlements complain about socialism and will shoot you down, the people who want to pay no taxes and want their benefits will shoot you down.
What all want is to be RICH like the 1%.
Bread and games. The Romans knew it. It's what most people still want. And just what the complainers will get.
The 1% are safe and secure in their ivory towers.
Oh the games people play now
Every night and every day now
Never meaning what they say now
Never saying what they mean
Oh they while away the hours
In their Ivory towers
'til they're covered up with flowers
In the back of a black limosine
We don't need an income tax, period. There should be only minimal excise taxes and tariffs, and a correspondingly small government.
I agree, only sales tax, so the more you buy the more you pay. Fair.
I agree with everything you said. Except for buying a bible.
A good message represented by bad people does not invalidate the goodness of the message; don't be so quick to throw out the baby with the dirty bathwater.
Yeah i agree, its like all those legions of paedophile priests' diminish greatly the validity of the story about that guy rising from the dead into the clouds. Or like the way those “evolution people” keep pointing out that creationists are retards, without ever accepting the fact that the world is only 2000 years old. It’s a shame.
but ... but ...
when you stockpile some bibles along with your guns, ammo, gold and food ...
when one of those runs out, then you can pray!
Should you leave out the bible, and then you maybe run out of ammo, well ... then you're SoL.
Accept your Saviour now!
But 48% of the jobs are created by the 3% of small firms that Obama touted as the only ones being effected. Obama is downright dangerous!
Here are the taxes hitting small business in America.
http://confoundedinterest.wordpress.com/2012/07/10/small-business-optimism-falls-to-november-2011-level-taxes/
If 3% of small firms are creating 48% of the jobs, how could they still be small firms - they hire people for one day and fire them over and over?
And these would supposedly be getting taxed at the "individual rate."
Does anybody know a business of virtually any size that isn't incorporated? Much less one with any employees?
It doesn't make sense to me--are extraordinarily successful paperboys being counted as small businesses?
ooops.
From my personal experience most small businesses are sole proprietorships. There are advantages to incorporating a single owner business, but there are disadvantages as well.
WHEN DO THE REPUBLICANS EXPOSE THIS MAN FOR THE LIAR HE IS?
Never. Educating the slaves is forbidden.
You're asking when the red liars will expose the blue liar? I'm not sure...likely never. Honor among theives and all that.
Upcoming presidental debate:
"You're a liar!"
"You're a liar!"
"You are!"
"No, you are!"
ad nasuem...
Well, other than Ron Paul, who do the Replicats have that is a non-liar?
Ron Paul is apart of the establishment. He could have told the "party" to fuck off and run on principle. He didn't, so he is just as much a slave to the body politik. The Party system is the enemy!!!
It would appear that they are so completely engrossed in telling the truth that they don't have the energy or time to deal with lies.
LMFAO! Since Obama's real base is the same a Romney's (Banks and financial houses) I'd say that this is all accordingly plan. In the meantime the 6 trillion in U.S. debt as a result of two useless fucking wars, still needs to be paid. Burn this shitpile down already so that compensation can find it's way back to people and labor that is of real fucking value. Fuck all the paper-pushers and their political puppets. Enough already.
I'm not sure it's that simple really... people who don't and/or won't be productive make an incredibly large voting block... I'm not convinced that we can even politically have meaningful change given the proportionate size of nonproductive people (e.g. government, FIRE, many professionals, etc.)... this group will simply be back at the trough as soon as you turn your head... this leads to the "value" of work really being immaterial... and the machiavelian aptitude and bureaucratic determination of a person being paramount. Sure, the market (reality) eventually clears this behavior, but for how long? To what end?
Bullshit. In the absence of any legitimate government (see much of the middle East) unproductive people starve. You are correct about not being able to return the rule of law and contracts or real consequences for bad behavior because in order to do this, those in charge would have to indicte themselves. As sad as it may seem, the world needs a catharsis on an epic scale.
"...If anyone will not work, neither shall he eat."
Paul, 2 Thessalonians 3:10
He is not speaking about physical work or eating.