This page has been archived and commenting is disabled.
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.
.
.
.
.
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:
.
.
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.
.
»
- advertisements -
Wrong. I am very much speaking of productive labor (much of it physical) that leads to things like eating. Time for the paper-pushing fucks that have been profitting from weapons of financial mass destruction to be executed. If this means the lazy stupid fucks are wiped out as well, fine, we will be even better for it when free markets return. This is already happening locally in a number of locations. Despute the federal government and the Federal Banking Cartel's best efforts, ALL economies are local. Don't confuse the Federal government (used to represent citizens of a republic-now co-opted by private money changers) with the Federal Reserve Bank (a PRIVATE banking cartel that you pay interest to).
Wake the fuck up, history shows you very clearly where this is heading.
oh, he is speaking very much about the physical side. Read the passage in its full context.
http://hartzman.blogspot.com/2012/07/some-answers-to-questions-asked-by.html
Well said. Raw-Money 2012!!
I'm curious to see what happens if the dividend taxes go up. Dividend yields are already pathetically low by historical standards and raising taxes on them changes the risk/reward calculation a great deal.
Any opinions Bruce?
They are going up. The only question is how high. Will it be 25% or 35%??
I'm guessing at another of those "compromises" where the rate goes to 30%. That would be a 100% increase....
Such much for the "dividend play" everyone is talking about....
Bruce where are they going to go? I agree the "dividend play" is a massive bubble. But people are going to sell them and put their money where? People are dying for income anywhere and anyhow. A company with a 5% div yield that is effectively 3% after taxes is still 3x more than what the bank pays.
The after tax yield of 2% may be better than a T-bill, but you forget that there is ton of risk in these dividend stocks.
This is about total return. If you earn 2% but lose 10% of principal invested as multiples contract, you are still down 8%.
You say that dividend stocks are the best dirty shirt. I say you are missing some big stains on this shirt. Wear it at your risk.
bk
I am simply asking where will the money go?
People need yield. They have been herded into the big dividend yielders. Sure the recent money may get nailed for a 10% correction but anyone who bought these companies a year or two would probably just see an opportunity to add. With ZIRP there is nowhere else to go. Or is there? I don't see these people lining up to buy gold.
Not to spin your question ... but if you head over to the Federal Reserve and peek at the H6 for M1 ...
http://www.federalreserve.gov/releases/h6/Current/
May '12 unadjusted vs May '11 unadjusted shows a 15% increase. This isn't the (discontinued) M3, or even M2!
Now, I have zero professional experience in finance, but my common sense is tingling ... I think the earthquake has been happening for a while now and the flood of liquidity cometh ...
http://www.youtube.com/watch?v=gWmFrmBtE-I
Regards,
Cooter
P.S. Is there a reason the M1 should not be terrifying? I mean, its been like this for months and months, going from 15% to 20% YoY ...
Looks like deflationary fears, as money is flowing in to liquid assets. Also consider that people are running into issues borrowing money, so they have to go the old fashion way of saving money to make big ticket purchases. In the past 18 months savings deposits rose by about 900 Billion and Currency rose about $130 Billion. Small-denomination desposits fell. So those with little money are withdrawling to meet ends, while those with good paying jobs are banking there incomes (perhaps on fears of job loss). The rise of $130 billion in Currency could be people taking money out of banks (stuffing matresses). If we saw money flowing out of savings (earn zero interest) and into checking and other accounts, then there would be a worry for inflation/liquidity flood. checkable deposits are flat.
High inflation will come after the Euro crisis runs its course and eyes start focusing on the US fiscal problems. As long as the Euro crisis in on the front page, US problems are on the back burner. At least for the next 12 months will will continue to remain in a stagflationary economy as people continue to save money, people lose jobs, and non-discretionary costs (food, energy, etc) continue to rise (but at a modest rate). Inflation needs the public to realize that the federal gov't is dead broke and will not be able to honor it debts and liabilities. We'll need to see some Euro soveriegn defaults first, before the public starts to understand.
because m1 is dwarfed by discontinued metrics...
Damn metrics, always being rascist towards dwarves.
They won't pin a fixed rate that high. Dividends will go back to ordinary income. Capital gains probably go back to 20%, maybe 25% (+3.8% for Obamacare).
Not really a big deal since 30% of nothing is still nothing:
1. Interest rates are zero so anyone that is investing in bonds, CD, etc is getting back almost nothing
2. The stock market will either be flat next year or decline (because of the rising taxes on the economy and the weak economy in general).
Perhaps if there is a repeal (assuming romney wins) then this point will be mute. At this point it seems a far fetch to assume O'bama will win in November. Not that I am a big fan of Mittens, but just an observation based upon the low public opinion of O'bama.
"The average annual wage in the US is $42,000"
Use the median annual wage which is about $28K. since the majority of people earn less than $42K per year.
"It does not have a snow ball’s chance in hell of passing"
Doesn't matter since the tax cuts expire. If O'bamas tax proposal flops taxes still go up. Also consider rising healthcars costs that go up into 2013 with O'bamacare. Its unlikely that Mittens will reverse most of O'bamacare if he wins. Mittens will also likely propose a flat (national sales tax) and probably a boatload of new bailouts\handouts to Wall street, but we will probably cut the capital gains tax (which benefits Wall street).
The average prudent and risk averse (read young and especially old) is being robbed utterly blind, 2 generations deep.
-2.5% looting of savings through inflation-fellatio or "fellation" and ZIRP.
Fuck bankers, fuck taxes -- a key tool of the banking cronyism syndicate Krasting portends to distance himself from.
On a side not: I feel dividend stocks are in the early stages of a bubble.
If the taxes do go up, I'm dumping my entire portfolio of stocks. The risk/reward for such high evaluations and low yields doesn't make sense.
The crazy thing is that this market is so fucked up that it may not even correct appropriately (prices go down to keep yields the same).
"On a side not: I feel dividend stocks are in the early stages of a bubble.
If the taxes do go up, I'm dumping my entire portfolio of stocks."
You might want to read this...
Is Obamacare Tax Killing Stocks?The 5-4 decision upholding Obamacare has a side effect: It makes that 3.8% surtax on investment income definitive.
For people of a libertarian bent, it was reassuring to have Chief Justice John Roberts decree that Congress can’t make us eat a balanced diet. But his decision is a reminder that the government has more or less unlimited power to tax us.
The healthcare law’s tax provisions include a 3.8% extra income tax on dividends, interest and capital gains. Absent some deal between President Obama and Congress, it goes into effect in January. It applies to portfolio income to the extent that the taxpayer’s adjusted gross income tops $250,000 on a joint return ($200,000 for singles)."
http://www.forbes.com/sites/baldwin/2012/06/28/dividend-tax-up-spy-down/
Early stages? Even utilities are at like 17 times earnings. I'm dumping everything now. Just have to leave it in MM and get zero percent while inflation eats it away. I guess that's the purpose.
Gold and Silver.
That is PRECISELY the purpose.
Save fraud, eat shit.
Well, what's the alternative given we must keep up the appearance of austerity at the same time as pandering superficially to populist nonsense? Practically speaking, what are we supposed to do, grandfather in old wealth? Do we as a society really value unearned income? Should we value it?
When the IRS changed passive activity rules in the eighties, everyone was screaming bloody murder at what it would do to investments predicated upon the passive deductions/losses. That didn't turn out so bad...
In reality, all it's going to mean is people shift their wealth to some other more attractive pasture... the tax man chaseth and the tax mule runeth away.
PS, all we're building up to is confiscation anyway... might as well warm up to the idea (or, alternatively, prepare accordingly).
When you see statements like "tax cuts to cost $150 billion." I think that pretty much says "all your money are belong to us now." When they 'let' you keep your own money it costs them?
In reality, all it's going to mean is people shift their wealth to some other more attractive pasture...
And it will be a net-negative for the economy if that pasture is gold or the mattress or a secretive offshore entity. Capital goes where it's welcome and stays where it's well treated.
"Old wealth" in this context is anything you had before the current tax year and you're not earning anything, passively or actively, until you surpass inflation anyway.
I really hate this mentality, i.e. kiss the ass of capital or it will run away.
It's that type of mentality that lets Romney make $20 million per year in the Caymans without shedding a drop of sweat. And then have the balls to run for President!!
The reason we have high unemployment is that money ain't tricklin down. We need to find a way to pry all that money from the top 1% and stick it in the hands of people that will spend it. I don't care about the morality of the issue, that's how you would stimulate the economy.
If capital runs away, chase it....and rape it. Don't leave a penny for Romney to spend.
Like gravity it's a reality not a mentality and it doesn't matter whether you hate it or not. And state capital controls don't have a great record of benefiting "the little guy" either.
Romney's money isn't in the Caymans because he wants it to get a tan, it's there because it would get eaten alive by the government over here (and, more recently, the likelihood that it might be seized outright is that much higher).
There's a whole world of incentives that the government could set up to match Romney's offshore $$ with capital hungry businesses over here. The trade-off would be a willingness to accept the outcome that he would make even more money in the process. A tough pill to swallow perhaps for those who talk as if the world runs on greed but act as if it runs on envy.
Well said Mercury. I am kinda sorta simple but look back in the day when smoker's were first targeted and we are going to tax Tobacco because they are evil smokers and we need money to take care of them because these stupid people are killing themselves. They vote on the tobacco tax and everyone cheers when it passes. Next they moved into businesses that allowed smoking and called them vile. The idiots cheered as they again got duped into passing bans on smoking closing alot of the businesses they chose to protect. This did not effect them as they did not smoke or chose to avoid places where smoking was allowed or they too like the idiots that smoked bitched and moaned because they chose to drink or eat at a location that allowed smoking. Now it is all gone in some places and they cheered.
The government moved on to bigger and better things and something that had sugar in it is now evil and make people fat (hehe even though the dumbasses chose to super size their food) and tell the people they cannot supersize. Now they want to put a tax on the soda you drink and you balk because you love that soda drink. Guess what you were duped all along. The government knew they could play you for a fool to extract more money from you because they played on your hate. Now they dam near control everything and have moved onto those that make more money then you pointing the finger to again get your attention diverted from the real criminals the idiots you elected and did not hold accountable.
I really do not care what the fuck Romney does to be honest. I am an ole fart. But I do know a capital venture company is. It is not the evil thing the president makes it out to be. I am not sure to be honest if these ramblings illustrates my point. But do not believe for a minute any of these assholes is doing anything for you. This is all about control, class envy, and dividing the country when we need to be bringing it together to solve the problems.
I have always found this interesting, everyone (mostly) wants to be wealthy, almost a universal given.
But when someone becomes wealthy through work, sacrifice and investment (taking years of making the right decisions and taking on risk of savings) they are pilloried by "certain individuals" for just being wealthy.
Why is it that for someone who picks the numbers on a powerball lottery for a buck or two (which involves minimal time and risk)...its a completely different vibe towards them?
Very strange.
Its almost as if the "angle" is...keep paying that lottery poor mans tax...you may get lucky...or not ;-)
I don't think it will be long before the "economy" and "capital" will have completely new definitions, and getting from here to there is going to be a trauma.
So what - doublespeak will ultimately save the day?
Call them what you wish but they're still the same things. Capital = stuff that begets other stuff and the economy is more or less the sum total of how that capital gets allocated, created/destroyed and under what conditions.
Bologna!
Interview with NSA whistleblower about snooping on United Statesians...
http://www.youtube.com/watch?v=qMy2ZbPkyvw
Obama drinks my milkshake! And your milkshake.
There is no middle class tax scam because there will be no middle class left at this rate.
true, at this point, even the phrase "middle class" is a scam
Its good to know Dear Leader has decided at what income level the middle class stops...now everyone can plan accordingly.
What was that old Soviet phrase again?...ahhh yes, they pretend to pay us and we pretend to work...now theres a real recipe for success ;-)
Better be a small no sugar milkshake, lest it run afoul of the large sugary drink nazis.