How lucky are we that these are the people who are helping President Obama in the RUNNING of our country and the White House?
The 2013 Tax Cliff
Business had better enjoy the next 16 months.
President Obama unveiled part two of his American Jobs Act on Monday, and it turns out to be another permanent increase in taxes to pay for more spending and another temporary tax cut. No surprise there. What might surprise Americans, however, is how the President is setting up the U.S. economy for one of the biggest tax increases in history in 2013.
What this means is that millions of small-business owners had better enjoy the next 16 months, because come January 2013 they are going to get hit with a giant tax bill. Let's call the expensive roll:
• First comes the new tax hikes that Mr. Obama proposed on Monday. Capping itemized deductions and exemptions for the rich would take $405 billion from the private economy for 10 years starting in 2013. Taxing carried interest would raise $18 billion, and repealing tax incentives for oil and gas production would get $41 billion.
• These increases would coincide with the expiration of the tax credits, 100% expensing provisions and payroll tax breaks in Mr. Obama's new jobs program. This would mean a tax hit of $240 billion on small business and workers. That's the downside of temporary tax breaks and other job-creation gimmicks: The incentives quickly vanish, and perhaps so do the jobs.
So even if the White House is right that its latest stimulus plan will create "millions of jobs" through 2012, by this logic a $240 billion tax hike on small businesses in 2013 would cost the economy jobs. This tax wallop would arrive when even the White House says the unemployment rate will still be 7.4%.
• January 2013 is also the same month that Mr. Obama wants the
Bush-era tax rates to expire on Americans earning more than $200,000. That would raise the highest individual income tax rate to about 42%, including deduction phase-out’s, from 35% today. Congress's Joint Committee on Taxation found in 2009 that $437 billion of business income would be taxed at higher tax rates under the Obama plan. And since some 4.5 million small-business owners file their annual tax returns as subchapter S firms under the individual tax code, this tax increase would often apply to the same people who Mr. Obama is targeting with his new tax credits.
The capital gains and dividend taxes would also rise to an expected 20% rate from 15% today. The 10-year hit to the private economy for all of these expiring Bush rates: about $750 billion.
• Also starting in 2013 are two of ObamaCare's biggest tax increases: an additional 0.9-percentage point levy on top of the 2.9% Medicare tax for those earning more than $200,000, and a new 2.9% surcharge on investment income, including interest income. This will further increase the top tax rate on capital gains and dividends to 23.8%, for a roughly 60% increase in investment taxes in one year.
The White House's economic logic seems to be that its new spending and temporary tax cuts will so fire up investment and hiring in the next 16 months that the economy will be growing much faster in 2013 and could thus absorb a leap off the tax cliff. But this requires its own leap of faith.
The White House also predicted a similar economic takeoff from the 2009 stimulus that was supposed to make a tax hike possible in 2011. Then last December Mr. Obama proposed new tax incentives only for 2011 because the economy was supposed to be cooking by 2012. Now it wants to extend those tax breaks so the economy will be cruising in 2013.
All of this assumes that American business owners aren't smart enough to look beyond the next few months. They can surely see the new burdens they'll face in 2013, and they aren't about to load up on new employees or take new large risks if they aren't sure what their costs will be in 16 months. They can also reasonably wonder whether Mr. Obama's tax hike will hurt the overall economy in 2013—another reason to be cautious now.
For the White House, the policy calendar is dictated above all by the political necessities of the 2012 election. Mr. Obama will take his chances on 2013 if he can cajole the private economy to create enough new jobs over the next year to win re-election, even if those jobs and growth are temporary. Business owners and workers who would prefer to prosper beyond Election Day aren't likely to share Mr. Obama's enthusiasm once they see the great tax cliff approaching. Look out below.
Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved
HOW DOES THIS STRIKE YOU? MAKE SENSE--OR NOT?
You may have seen this before. When the number of Americans who do not pay income taxes exceed the ones who do, we seem to be approaching this condition. Ours is a nation on the verge of a "breakdown," largely due to the leadership failures, and misdeeds of our elected officials--and I am not just talking about Barack Obama.
"Currently...The people who are getting the free stuff don't like the people who are paying for the free stuff, because the people who are paying for the free stuff can no longer afford to pay for both the free stuff and their own stuff. Therefore, the people who are paying for the free stuff want the free stuff to stop, while the the people who are getting the free stuff want even more free stuff on top of the free stuff they are already getting!In the meantime, the people who are forcing some people to PAY for the free stuff are telling the people who are RECEIVING the free stuff that the people who are PAYING for the free stuff are being mean, prejudiced, and racist. That's right---the people who are GETTING the free stuff are being told they need to HATE the people who are paying for the free stuff by the same people who are forcing some people to pay for other people's free stuff in the first place!FACT: ALL great democracies have committed financial suicide somewhere between 200 and 250 years after being founded. The reason? .... the voters figured out they could vote themselves money from the Treasury by electing people who promised to give them money from the Treasury in exchange for electing them.The United States officially became a Republic in 1776, 231 years ago. Today, the number of people getting free stuff outnumbers the people paying for the free stuff!Folks, we have one chance to change this in 2012. Failure to do so spells the end of the United States as we know it.ELECTION 2012 IS COMING .... Let’s Take a Stand!!!Here are some proposed parts of such a stand:Obama: Gone! Borders: Closed! Language: English (only) Culture: Follow the Constitution and the Bill of Rights! Drug Free: Mandatory Drug Screening before Welfare! NO freebies to: Non-Citizens!"
The Ticket Obama Fears Most
If Senator Rubio becomes the running mate of Governor Perry, which I believe is increasingly likely, President Obama could face his worst electoral nightmare. At the outset, both men are excellent campaigners -- articulate, likeable, attractive, and accustomed to winning elections in the diverse and large populations of Texas and Florida. Unlike Republican nominees since Reagan, Rick Perry knows how to work crowds. Perry, like Rubio, has never lost a political race. Although it is a relatively small section of his resume, his time successfully selling Bible reference books door-to-door may be as important as background in running for president.
Both Perry and Rubio have life stories which demonstrate that the American Dream really works. Perry grew up on a cotton tenant farm in the middle of nowhere and worked hard up every step in his path to success. Rubio's parents worked in menial jobs so that their son could have a better life. Imagine Rubio campaigning in Las Vegas, where his parents worked like so many Hispanics today, cleaning rooms and tending bars. The greatest impact of these life stories is that the Republican ticket could say just how poor people need not stay poor if government gets out of the way.
Perry and Rubio are both social and economic conservatives. The left tries to downplay the appeal of social conservatism, but to take just a single social conservative issue, abortion, the latest Rasmussen Poll shows that 55% of Americans believe that abortion is morally wrong while only 30% believe that abortion is morally acceptable and 41% of Americans believe that it is too easy to get an abortion in America while only 14% believe that it is too hard to get an abortion. The vanilla question about whether Americans are "pro-choice" or "pro-life" is meaningless, if Republican candidates have the gumption to ask Obama in a debate whether he believes abortion is moral or immoral -- leaving the question of federal policy on abortion aside.
This particular ticket would also have profound appeal to Hispanic voters, whose support for Obama has dropped a dramatic 36 points since he took office. The impact of Rubio on the ticket, of course, is obvious: he would be the first Hispanic on a major party ticket in American history. Big chunks of Hispanic voters in 2008 voted for Obama because he was a "person of color." Reelecting a black man president has much less psychological value to Hispanic voters than electing a Hispanic who could easily be president in eight years.
The impact of Rick Perry is real, but underestimated by Beltway punditry, which listens more to high ranking Hispanic organizational leaders rather than ordinary Hispanics. Perry has won many statewide elections in Texas, including three as governor. Almost 40% of the state is Hispanic. Governor Perry speaks Spanish, but more than that, just as a New York City or Chicago politicians grasp the nuances of European ethnic differences, so Perry understands the largely Mexican-American minority and has steadily improved his percentage of the Hispanic vote in Texas elections.
A politically savvy Perry with the first Hispanic on a national ticket as his running mate could disarm the traditional skittishness that some Hispanics have had about voting Republican. Combine that with the very real success that Perry has had in creating jobs in Texas -- compared with Obama nationally or California Democrats -- and he could make a strong argument that Perry-Rubio is precisely what most Hispanics really want in Washington.
This could be complemented by the rise of Hispanic Republicans in 2010. Susana Martinez, the conservative Republican governor of New Mexico, next door to Texas, is a prime example. The first female Hispanic governor in American history could travel throughout the Rocky Mountain region touting a Perry-Rubio ticket. It is not just Hispanic "people of color" that could connect with Hispanics. Bobby Jindal and Nikki Haley, both articulate and strongly Republican governors could both show the legal immigrants from lands as distant as India are welcomed by conservatives.
Black voters will go overwhelmingly for Obama, but black voters vote overwhelmingly for Democrats no matter what Republicans have tried. If Hispanic voters, already accustomed to conservative Republicans senators and governors, vote in substantial numbers for conservative Republicans at the national level, then not only is Obama in trouble, but so is his party. That is why Perry-Rubio could be the ticket Democrats fear most.
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"In 2007, 390,000 tax filers reported adjusted gross income of $1 million or more and paid $309 billion in taxes. In 2009, there were only 237,000 such filers, a decline of 39 percent. Almost four of 10 millionaires vanished in two years, and the total taxes they paid in 2009 declined to $178 billion, a drop of 42 percent, says the Wall Street Journal.
These disappearing millionaires go a long way toward explaining why federal tax revenues have sunk to 15 percent of gross domestic product (GDP) in recent years.
But the millionaires who are left still pay a mountain of tax.
Those with adjusted gross income above $200,000 a year were just under 3 percent of tax filers but paid 50.1 percent of the $866 billion in total personal income taxes.
Before the recession, the $200,000 income group paid 54.5 percent of the income tax.
Source: "Millionaires Go Missing," Wall Street Journal, August 17, 2011.
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Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
—Ronald Reagan
Come see me on Forbes.com, and American Express' Open Forum.com Just search for Mariotti, and read...
Author of the award winner: The Complexity Crisis & The Chinese Conspiracy (a novel)
John L. Mariotti, President & CEO, The Enterprise Group, Phone 614-840-0959 http://www.mariotti.net, http://mariotti.blogs.com/my_weblog/
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