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Cliff Deal - Winners and Losers

Bruce Krasting's picture




 

Note: I wrote the following after watching the Prez on TV. His smiling demeanor and tough guy talk led me to believe that a "patch" on the cliff might happen. Four hours later, and that is not the case. The House will not vote on anything today.

There is a chance that the House could vote tomorrow. This would bring results along the lines I describe below. But if the House does not vote, then it means there will be a long fight. A fight that could go on until the debt limit shuts the government. 

These people are desperately trying to fail.

 

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My read of the President's speech is that there is a deal that will avoid the cliff. So go enjoy New Year’s Eve. Give it another 30 days, and we’ll be right back into the soup. My scorecard on the deal.

 

-If you’re unemployed, you’re a winner. You get another extension of benefits.

 

-If you’re employed, you’re a loser. Fully 155m workers are going to pay 2% more on income starting tomorrow. The increase in FICA taxes will come to a lumpy $120B. This will rank as one of the largest YoY tax increases in history. This is a very regressive tax increase. There is a $108K cap on what is subject to FICA taxes, so high incomes do not feel the bite. But those who earn an average income will see a meaningful reduction in disposable income ($2,000 per household).

 

This is a decidedly un-Democratic outcome. The rich avoid taxes, lower incomes pays a disproportionate share. Who insisted that this unfair outcome was part of the deal? Answer: Harry Reid, Nancy Pelosi and Barack Obama. Don’t blame the Republicans when your next check has an extra bite out of it. “Go figure?”, on this outcome.

 

-If you make between $250 and $400k, you are a very big winner, congratulations. Half of the top 2% just got a free pass.

 

-If you make over $450k, the cliff deal says you may have to pay more taxes. I wouldn’t worry too much about the top 1% - that group has 18% of all income. The move from 35 to 39.6% for America’s richest will not matter a bit. None of them paid the old rate, they won’t pay the new higher rate either.

 

-If you’re one of the 33 million taxpayers who avoided falling prey to the Alternative Minimum Tax (AMT) by the last minute patch, you dodged a bullet. This would have taken an average of $4k out of your pocket. I’m happy for you.

 

-If you’re one of the 4 million hopeless losers who have been stuck with AMT in prior years, you’re going to get stuck again. I’m one of those poor souls who is mired in this tax trap. It's a very unfair outcome for me. I make a fraction of the top 1%, but because of AMT, I pay a minimum federal tax of 28% while the top 1% pays an average of only 15%. Where’s the damn cyanide?

 

-The defense industry will have the bubbly out tonight, no sequestration for them for the time being. Phew! I was really sweating this one!

 

-Investors will also have the Champagne out. They dodged a bullet – at least for the next 60 days…..Keeping the 15% Cap Gains rate for most incomes is a plus, the new 20% rate for the top filers is a gift.

 

-The American people are very big losers. The cliff deal just sets up another crises before the snow melts. Nothing has been accomplished that addresses the uncertainty factor. The deal insures a big deficit for 2013. It will not increase tax revenue from the top 1%. It will result in a big increase in payroll taxes that will hurt the bottom 40%.

 

-Washington is the biggest loser of all. Democrats, Republicans, Senate, House and Obama all come off looking like chumps. They didn’t deliver anything but a Band Aid. I give the cliff deal a D-.

 

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Mon, 12/31/2012 - 15:30 | 3110057 GMadScientist
GMadScientist's picture

High-frequency lobbyist turn-over doesn't seem like much of a fix...how is taking turns being corrupt going to help exactly?

Mon, 12/31/2012 - 15:33 | 3110068 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

It takes a while to get really good at it, as with everything else.

Mon, 12/31/2012 - 15:20 | 3110028 Ned Zeppelin
Ned Zeppelin's picture

Agreed, Professor.  I wonder if this deal is really a DONE DEAL, or last second rumor. 

Mon, 12/31/2012 - 15:18 | 3110013 DavidC
DavidC's picture

"They didn’t deliver anything but a Band Aid".

I'd argue they haven't even done that. I said it earlier, they're pathetic.

DavidC

Mon, 12/31/2012 - 15:16 | 3110005 stant
stant's picture

i am planning on not being as much of a loser as last year, screw them

Mon, 12/31/2012 - 18:44 | 3110821 TraderTimm
TraderTimm's picture

I plan on making another 200% yield on BTC. The dollar can go fuck itself.

Mon, 12/31/2012 - 15:47 | 3110117 HobbyFarmer
HobbyFarmer's picture

I loaded the higher Employee social security rate into the payroll system this morning....from 4.2 to 6.2%.  Doesn't sound like much, but with increased cost of benefits, people will see a sizeable drop in their pay stubs.

Do you think average pay increases will be in the 3% range for employees to simply keep even with last year?  I doubt it, too.

Mon, 12/31/2012 - 16:18 | 3110236 duo
duo's picture

the boss told me that 2% is coming from my raise this year.

I guess  I'm not buying that GM car, then.

Mon, 12/31/2012 - 17:59 | 3110704 imapopulistnow
imapopulistnow's picture

The 2% payroll tax restoration is going to bite the working poor and the economy in a bad way.  When one lives paycheck to paycheck, every dollar counts.  Just goes to show the Democrats are into their elitist, academic crap and really don't give a shit about the poor in this country, Obama included.

Mon, 12/31/2012 - 19:22 | 3110855 Muppet Pimp
Muppet Pimp's picture

My game plan is to extend, extend, extend to the extent the IRS allows, followed by penning a letter describing what a collosal failure our government is and that I cannot in good conscience send them anymore money as they just waste it.  We'll see how far this gets me, stay tuned....Suppose I will be a felon later this year for doing the right thing.  I am on the verge of losing my job for inisting they stop abusing our taxpayers in a time of financial distress.  This is totally frowned upon, seeing as it is spending spree time to blow all the money left in the budget, even though it was not needed ("or else we won't get as much to blow next year!").  At that point I will create a local media circus when I expose all the shady dealings I have seen during my 2 year tenure there.  At that point I will be unemployable and will seek out a nearby overpass to shelter under until such time as I see fit to jump off said overpass.

 

- Future 'Felon'

 

Is it just me or does anyone else find it amusing that the entire world is now hamstrung from government policies.  And their solution is to give them some more money.  And the sheeple will oblige.  Brilliant! 

 

Tue, 01/01/2013 - 07:14 | 3111756 Mike in GA
Mike in GA's picture

you work for government?

Tue, 01/01/2013 - 09:34 | 3111801 Muppet Pimp
Muppet Pimp's picture

I am a reformer aka a turnaround guy.  My work is done in classic mole style.  Once I have enough dirt I begin instituting reforms.  I do not seek to damage anyones reputation publically so long as they will start doing the right thing.  In the unlikely event that I am turned against unfairly (aka terminated without due cause) for trying to fix things, I become what is know in the industry as a whistleblower.  The key feature here is that if everyone involved decides it really is best to do the right thing and take care of the client (aka the taxpayer) then any embarassing revelations occur internally only and in the end everyone involved looks like a hero for doing right by their people.  It is a win/win really. 

(And if you did not notice, I am unfortunately awfully snarky, sarcastic, and a smart ass.  I won't actually be sheltering or jumping from a overpass.)

See this for a gist:

http://reason.org/news/show/innovators-carrollton-texas

This model only works in 'right to work' states.  In unionized states this work can be deadly.

Tue, 01/01/2013 - 14:10 | 3112354 phyuckyiu
phyuckyiu's picture

FUCK YOU ALL on your 2% payroll tax hike. You sacrificed my (50 year old and under) future of any chance of collecting Social Security so you can get your little 2% bonus on your paycheck today. That 2% wasn't yours to begin with you little BITCH, it was a sacrifice you made for our (YOUR FUCKING CHILDRENS) future. So again, FUCK YOU, and good luck selling your house to any one of us, BITCHEZ.

P.S. If Social Security is a joke, then so be it, ABOLISH it now while you greedy fucks are still collecting.

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