The Fiscal Cliff, In Three And A Half Graphics

[mickeyd]

Here's a way to size up the fiscal cliff that every-one's talking about. Could be catastrophic.

Source: The Committee For A Responsible Federal Budget
Credit: Lam Thuy Vo / NPR


Here's a breakdown of the tax increases.

Source: The Committee For A Responsible Federal Budget
Credit: Lam Thuy Vo / NPR

Here's a breakdown of the spending cuts.

Source: The Committee For A Responsible Federal Budget
Credit: Lam Thuy Vo / NPR

Source: The Committee For A Responsible Federal Budget


The biggest chunk of spending cuts come from what wonks call the "sequester," and what everybody else calls "those random cuts that got scheduled when Congress voted at the last minute to raise the debt ceiling and set up a supercommittee to cut spending, but the supercommittee couldn't figure out how to cut spending, so now a bunch of automatic cuts are supposed to kick in." There's a good chance that Congress will intervene to block some or all of these cuts.

The Fiscal Cliff, In Three And A Half Graphics : Planet Money : NPR

 

[chrisaukcam]

Well I guess it is what we suspected all along, they are not serious about cutting spending. But they can't wait to get their hands in our pockets and raise taxes.

 

[Nords]

I think "very simple" in the context of "fiscal cliff" is oxymoronic.

But I also think that the only way the tax increases and budget cuts are going to happen is if nobody has to be responsible for them. "It's not my fault, the last Congress made us do it and we couldn't stop it!"

 

[beowulf]

Personally, I think the cuts are a good thing. As long as they don't cut anything that effects me .

 

[ziggy29]

Personally, I think the cuts are a good thing. As long as they don't cut anything that effects me .

I know this is tongue in cheek, but in reality this is exactly why we're in this mess. Everyone agrees with fiscal sanity but many folks will only go along if all the pain and sacrifice is borne by other people.

 

[Katsmeow]

The thing that annoys me about even calling this a fiscal cliff is that two of the main "new" taxes are the Bush tax cuts -- which were temporary in the first place -- and the payroll tax cuts -- which were temporary in the first place. I mean whether you like those tax cuts or think they should expire -- it shouldn't come as any great shock to see them expire and they shouldn't really be looked at as tax increases but more as tax restorations for taxes people were already paying before.

 

[ziggy29]

The thing that annoys me about even calling this a fiscal cliff is that two of the main "new" taxes are the Bush tax cuts -- which were temporary in the first place -- and the payroll tax cuts -- which were temporary in the first place. I mean whether you like those tax cuts or think they should expire -- it shouldn't come as any great shock to see them expire and they shouldn't really be looked at as tax increases but more as tax restorations for taxes people were already paying before.

I don't disagree, but it also demonstrates the stupidity of "temporary" tax cuts or tax hikes. Just make it permanent into law, and if the economic situation and/or political will changes in the future, change it again.

But in reality I am a strong supporter of VERY stable tax policy. The exact level of taxation or the exact number in each of the brackets is, within reason, less important to me than the certainty a very stable tax policy, not one likely to change with every change in political power in Washington, would provide for businesses, labor, consumers and investors.

 

[rescueme]

(snip)...it shouldn't come as any great shock to see them expire and they shouldn't really be looked at as tax increases but more as tax restorations for taxes people were already paying before.

But, but I deserve not to have this tax restored ...

 

[scrabbler1]

The thing that annoys me about even calling this a fiscal cliff is that two of the main "new" taxes are the Bush tax cuts -- which were temporary in the first place -- and the payroll tax cuts -- which were temporary in the first place. I mean whether you like those tax cuts or think they should expire -- it shouldn't come as any great shock to see them expire and they shouldn't really be looked at as tax increases but more as tax restorations for taxes people were already paying before.

I agree. And any tax reform measures should assume ALL these tax cuts have expired before any of those so-called "lower rates and broaden base" ideas begin.

 

[Mulligan]

The thing that annoys me about even calling this a fiscal cliff is that two of the main "new" taxes are the Bush tax cuts -- which were temporary in the first place -- and the payroll tax cuts -- which were temporary in the first place. I mean whether you like those tax cuts or think they should expire -- it shouldn't come as any great shock to see them expire and they shouldn't really be looked at as tax increases but more as tax restorations for taxes people were already paying before.

The problem in which you refer to concerning the Bush cuts, will also be occurring soon with the 2% temporary cut in employee SS tax. If this goes on much longer, politicians will be scared to restore it from fear of being labeled a tax increaser, thus compounding the SS shortfall problem even more.

 

[ziggy29]

The problem in which you refer to concerning the Bush cuts, will also be occurring soon with the 2% temporary cut in employee SS tax. If this goes on much longer, politicians will be scared to restore it from fear of being labeled a tax increaser, thus compounding the SS shortfall problem even more.

It was a gimmick from the start. Yes, in theory the government said this would not worsen the SS shortfall since they would make up the lost revenue with the rest of the budget, which just means that there's more debt for SS to hold. And in reality SS is only as solvent as our ability to service the debt. In that sense, it was a gimmick, a shell game, that really solves nothing other than to put an extra 2% in everyone's pocket. Now the poor and middle class need relief from flat incomes and rising prices, but was this the way? I don't think so.

 

[frayne]

If we go over the cliff, will we get our triple AAA credit rating back ? And if so would that be a bad thing ? I know some will say the expiration of the tax cuts and reduction in spending will hurt the economy but isn't this something along the lines of a little pain now, or a whole lot of pain later ?

 

[Thormole]

Another disturbing change included in fiscal cliff discussions is the estate tax exclusion dropping from the current $5 million down to $1 million next year. If this is not changed, it could seriously affect the ability to pass along family farms and businesses to the next generation, although I imagine it would raise a great deal of government revenue.

 

[Animorph]

At a minimum we need to spread all the changes over a number of years so the economy doesn't just walk off the cliff. And it would be nice to have some idea of what tax rates were going to be in 2013.

 

[steelyman]

I think it is a long-overdue detox.

 

[beowulf]

I think it is a long-overdue detox.

+1

 

[Purron]

Lots of worry here in the DC area about the defense cuts. Don't have much hope our dysfunctional Congress will work this out. Glad we sold our other house.

 

[Alan]

I think it is a long-overdue detox.

+2

However, I don't believe it will all go through. At the very minimum they will adjust the AMT as they do every year, plus I can't see many of the spending cuts being allowed to happen.

 

[ducky911]

I would gladly pay more taxes if it would solve the problem. But it seems to me to only be a bandaid on a wound that will not heal.

When my son was in little league I use to help out at practices, the coach told me he figured out why my son threw side armed...it was because thats the way his dad throws.

The goverment wonders why people over borrow ie credit cards, car payments and morgages.....I use to have a boss that use to always say that " a fish rots from the head down"

I see a big problem after the election and before the end of the year. We are going to either have a lame duck president or a pissed off republican house...

 

[Midpack]

Simpson-Bowles (Bowles-Simpson), still the best place to start IMO http://www.fiscalcommission.gov/sit...files/documents/TheMomentofTruth12_1_2010.pdf. Every American taxpayer should read it and be prepared to sacrifice responsibly, but few ever will. I quit holding my breath quite a while back. I hope we find the collective will to act before we reach Greece's predicament...

 

[braumeister]

I'm building a fiscal hang glider in my basement, so I'm not as worried about going off the fiscal cliff as I was.

 

[copyright1997reloaded]

Fiscal Cliff - Long Term Capital Gains Rate

I don't know about the rest of you, but one aspect of the expiring (end of 2012) rates that has my attention is the long term capital gains rate. Under the current rate structure, it is 15%. As of January 1, 2013, it is scheduled to rise to 20%.

As a result, I have some serious thinking to do on certain securities that I have a low cost basis on, that I've either had for a long period of time and a bunch of stuff I bought in the early 2009 time frame. That is, do I:

1. Sell after the election if Obama wins, assuming re-election means the rates will be rising.
2. Sell now, assuming everyone and their brother will be doing 1.
3. Wait it out.

I normally try not to use taxes as input into my buy/hold/sell analysis of securities I own, but the differences in taxes between the 15% and 20% is significant.

 

[M Paquette]

Yah. Some 'cliff', huh?

Don't mind me. I'll be over at Capitol Hill. Look for the guy shouting "Jump... JUMP...."

 

[M Paquette]

I don't know about the rest of you, but one aspect of the expiring (end of 2012) rates that has my attention is the long term capital gains rate. Under the current rate structure, it is 15%. As of January 1, 2013, it is scheduled to rise to 20%.

Tax loss harvesting. It's a Good Thing. And a hike in the capital gains rate makes captured losses just that much more valuable.

I banked losses back in 2008/2009 that should cover Capitol gains spun off by the portfolio for... Well, as long as I need, anyway. I'd guess that in the ongoing secular bear market, we have pretty good odds of seeing a 20% or so dip one more time in the next several years. If you have the opportunity to capture some capital losses in your taxable portfolio, do it!

 

[ducky911]

Tax loss harvesting. It's a Good Thing. And a hike in the capital gains rate makes captured losses just that much more valuable.

I banked losses back in 2008/2009 that should cover Capitol gains spun off by the portfolio for... Well, as long as I need, anyway. I'd guess that in the ongoing secular bear market, we have pretty good odds of seeing a 20% or so dip one more time in the next several years. If you have the opportunity to capture some capital losses in your taxable portfolio, do it!

I too have a bunch of losses left over. So if it goes to 20% it has increased the value of those old losses..right?..

Bob