Kicking the can down the road

From

Details of Tax Law Changes Spelled Out

By Laura Saunders | Updated January 1, 2013, 12:17 a.m. ET

The tax changes included in the bill hashed out between the White House and congressional Republicans Monday includes the first increases in top income-tax rates in nearly two decades. They also set new thresholds for determining who is “rich,” while leaving most people’s tax rates unchanged.

“It appears nearly 99% of the population would see little or no change in their income taxes for 2013,” said Roberton Williams, an economist at the Tax Policy Center in Washington.

It is unclear how large tax increases will be for the 1%, he said, as important details have yet to be released. And the measure hashed out by Senate Minority Leader Mitch McConnell (R., Ky.) and Vice President Joseph Biden still must be approved in both the Senate and the House, where passage can’t be assured.

More at the link. The details:

  • The Social Security payroll tax for individuals will rise from 4.2% to 6.2%, the ending of the “stimulus” provided for in the tax deal at the end of 2010. The tax is imposed on the first $113,700 of gross pay, and would raise approximately $125 billion per year.
  • The top marginal rate for ordinary income would rise from 35% to 39.6%, at the threshold of $400,000 for single filers and $450,000 for a married couple filing jointly. It is not yet clear whether that threshold refers to adjusted gross income or taxable income.
  • Current law would be permanently extended for income earned below that level.
  • For taxpayers above the $400,000/$450,000 threshold, the tax rate on dividends and capital gains would increase from 15% to 20%. For taxpayers below the threshold, the current 15% top rate would be made permanent.
  • The alternative minimum tax “fix” would be made retroactive and permanent.
  • The current gift and estate tax threshold would remain at the current $5,000,000, but the top rate above that would be increased from 35% top 40%.
  • The American Opportunity Tax Credit for college tuition of up to $2,500 would be extended for five years.
  • The current versions of the $1,000 oer child Child Tax Credit and Earned Income Tax Credit would be extended for five years.

Your Editor approves of the first provision; it would require everybody to pay more in taxes. Your Editor disapproves of the second, which is simply class warfare targeting the most productive Americans. However, your Editor most definitely approves of the third, fourth and fifth provisions, for one big reason: they would make the current tax rates permanent, meaning that the Congress could not impose a tax increase without having to actually vote on one.

That was the biggest failing of the 2001/2003 tax cuts: they had a sunset provision, after which tax rates would revert back to the 2000 tax rates.

However, the “deal”:

includes virtually no new spending cuts and did nothing to defuse the next fiscal bomb—the fast-approaching debt ceiling, which will have to be addressed by Congress by late February or early March, administration officials believe.

Also:

The changes in tax rates that were agreed to between Messrs. Biden and McConnell would raise roughly $600 billion in new revenue over 10 years. While that would represent the largest tax increase in decades, it would be less than 20% of the revenue that would have come in if policy makers allowed all the current tax breaks to expire on New Year’s Eve.

The sequestration has been pushed two months down the road. So, we have minimal tax increases and, for now, no spending cuts. Overall, nothing was solved.
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8 Comments

  1. Senate Capitulation Leader Mitch McConnell has demonstrated yet once again that Conservatives are deluding themselves by supporting the corrupt back-stabbing Republican Party.

    It’s time to face facts: the GOP is both incapable of and unwilling to represent the interests vital to Conservatives. The Republican establishment pays lip-service when they need our votes but they always have more important priorities when it’s their turn to stand up and prove their previous promises count.

    Conservatives will never have a consistent voice in the nation’s affairs until they break the bonds of voluntary servitude to the unreliable GOP and establish a party of their own, one wholly independent from the GOP.

  2. Conservatives will never have a consistent voice in the nation’s affairs until they break the bonds of voluntary servitude to the unreliable GOP and establish a party of their own, one wholly independent from the GOP.

    At this point, the Tea Party should split from the GOP. The only problem with that is it makes two minority parties and the Demoncrats. So doing that, the exercised 2nd amendment right of having a gun and shooting yourself in the foot won’t help.

  3. At this point, the Tea Party should split from the GOP. The only problem with that is it makes two minority parties and the Demoncrats.

    All the more reason NOT to split from the GOP but rather reform it from within. This happened first with Goldwater and later with Reagan. And Gingrich also played an important role.

    Bad enough that there’s a Libertarian Party that sucks some votes from the GOP, but a full fledged Third Party would keep us in the minority basically forever. Not a good idea.

  4. I have to agree with Eric on this one. The TEA Party are the libertarians with sense. Their ideas would fit in well with the Libertarian Party, but they realize that going third party will get them exactly what the Libertarians have achieved: nothing. The Libertarian Party has existed for decades now, and has elected exactly zero congressmen, zero Senators, and maybe one state legislator. Ron Paul was the Libertarian presidential nominee in 1988, but he actually won some elections by running within the Republican Party.

    The TEA Party, on the other hand, hasn’t been as successful as they, or I, would have liked, but they have gotten some of their people actually elected.

  5. Conservatives who’re waiting around for the GOP to lead them to the promised land are waiting in vain. The GOP establishment is well entrenched and its foremost principle is self-preservation. As long as new GOP leaders are drawn from the ranks of up and coming party insiders change will never come, it can’t.

    It’s much easier for GOP leadership to capitulate to Democrats and remain in power than to yield to Conservatives and be replaced.

  6. Conservatives who’re waiting around for the GOP to lead them to the promised land are waiting in vain.

    Well then, conservatives shouldn’t wait, but should take the leadership role themselves. I mentioned several prominent conservatives who did just that.

    And who’s to say a third party wouldn’t end up in the vsame place the GOP is now? What then, form a fourth party?

  7. Well then, conservatives shouldn’t wait, but should take the leadership role themselves. I mentioned several prominent conservatives who did just that.

    Yeah, keep leading the GOP further and further into the rabid right. Keep on screaming about Obama being a Kenyan, keep on calling women who speak out “sluts” and frothing at the mouth about contraception, and keep on espousing an economic policy based not on facts but solely on the idea that making the vast majority of Americans suffer has to be good for them.

    ‘Cos that’s worked out so well for you at the polling booth so far…

  8. ‘Cos that’s worked out so well for you at the polling booth so far…

    Let’s see. Three presidential landslide wins in 1980, 1984, and 1988, a Congressional landslide in 1994 and another one in 2010, two more presidential wins in 2000 and 2004, all victories won by conservaives running on conservastive orinciples.

    Like I said, you really don’t know jack about American politics, nor is your ability to Google up left wing web sites really teaching you anything useful.

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