Friday, January 4, 2013
Random ruminations from your resident curmudgeon....
Welcome our new dog for 2013. When looking for the new picture, I wanted something that was appropriate for our time and where we are in our country. There were a number of quality candidates, but I think this little fella really captures the spirit of our day.
So we have avoided the "fiscal cliff" in a last minute deal between the Obama administration, Democrats, and the recalcitrant Republicans who were demanding real spending reform. As we all know, the Republicans caved and the bill was done. Now that we have had a few days to pore through this travesty, there are some interesting facts that have received little fanfare from the main stream press. Fear not, friends, for I am about to expose some of the dirty secrets buried in the bill. A few of the items tucked inside the bill were: a $78 million accelerated tax write off for owners of NASCAR tracks, which specifically benefited Michigan International Speedway, courtesy of Debbie Stabenow (D-MI); Democrat Jeff Bingaman of New Mexico saved a tax credit for companies that operate in American Samoa, costing tax payers $62 million; rum distillers received a $222 million tax break; businesses that operate on Indian reservations received $222 million in accelerated depreciation tax breaks. Companies that manufacture wind turbines and other green energy equipment (think: General Electric) received tax breaks totaling $12 billion; bio-diesel manufacturers received a $2.2 billion tax credit; and algae based fuel manufacturers received a $59 million tax credit. Perhaps the most egregious giveaway of your money was the continuation of tax breaks to Hollywood film producers, who get to write off the first $15 million of their production costs for any film produced in the United States. While Congress and the White House give lip service to "comprehensive tax reform" and making the tax code "fairer", the truth is that our elected leaders continue their practice of giveaways to favored groups. Remember that as your taxes are going up this year.
Wisdom comes with age. So does memory loss. And you forget things.
While most of us will breathe a sigh of relief that we avoided higher income taxes, we will be paying more in taxes under the new bill that has been signed. Here are the particulars: households that make less than $450,000 (or $400,00 for individuals) will maintain their current tax rates. Cross those thresholds, and income tax rates will rise from 35% to 39.6%. If you have capital gains or receive dividends in a taxable account (non-retirement account), then your taxes on those items will increase from 15% to 20%. This will have a significant impact on seniors, many of whom augment income with dividends and capital gains. If household income crosses $250,000, some deductions will then be phased out. This includes mortgage interest deductions and charitable contributions. Payroll taxes will go up by 2% regardless of income level (so much for protecting the middle class). For some, there will be an additional 3.8% tax to fund Obamacare. This bill was anything but favorable for the middle class. Yes, income tax rates, as I mentioned, remained the same for most of us, but there are other bites taken out of our household income. And with a moribund economy struggling to rebound, these tax hits will further slow the process.
Math problems are the only time two trains can be speeding toward one another and no one is concerned.
While much of the discussion and attention in recent weeks was focused on the fiscal cliff, the more troublesome crisis that we have yet to seriously address is the $48 TRILLION in unfunded obligations of the federal government, primarily with deficits in Social Security and Medicare. Some even feel that the estimate of $48 trillion is very short of the real problem. Lawrence Kotlikoff of Boston University estimates the real amount of our unfunded obligations to be north of $200 trillion. Obamacare will spend $1.7 trillion over the next 10 years. As troubling as that is, Social Security is already running a deficit. According to the Social Security Trustees, $45 billion more was spent than was collected from payroll taxes. That deficit is going to grow substantially as more people become eligible for benefits. Even with the tax hikes that Obama proposed, our deficits will run over $7 trillion over the next 10 years. The next crisis? In March, the nation will reach its debt limit. And the fight that will occur then is going to be much more fierce than the one we just went through with the fiscal cliff. The reality is that we cannot raise enough taxes to cover these obligations and service the existing debt. Spending control and entitlement reform is going to be critical to get these programs and our country back on sound financial footing. Our elected leaders continue to shirk their responsibility to make the tough decisions and bring fiscal sanity to our country. It is imperative that each of us get engaged in this process and demand that our representatives make the tough and prudent decisions to keep our country from becoming the next Greece.
I started using a new shampoo that promised more body. It must be working. I have already gained 5 pounds.
And that, my friends, is my view.