Why The Fiscal Cliff Is Set To Crush TheMiddle Class With 50% Tax Rates

							Why The Fiscal Cliff Is Set To Crush The
Middle Class With 50% Tax Rates
Keith Fitz-Gerald
etfdailynews.com
December 10, 2012




Keith Fitz-Gerald: If I didn’t know any better, I’d think there’s a small but growing group of
people in Washington who think it would actually be good if we temporarily went over the fiscal
cliff.
I say that because I am seeing a smattering of articles recently suggesting that somehow going over the
cliff “won’t be all that bad” or that we’re “really just talking about cuts that need to happen in the first
place.”
President Obama seems to think the same way judging by the fact that he’s dug in his heels, telling the
GOP there will be no fiscal cliff bargain that doesn’t include tax hikes.
Now noted budget hawk Republican Senator Tom Coburn has broken ranks, noting that he’d
rather see rates rise because that “will give us a greater chance to reform the tax code and
broaden the base in the future.”
I find that to be an absolutely appalling argument given how much further the president’s proposals will
squeeze the middle class.
As Fox Business Network’s Gerri Willis, an expert on consumer and personal finance issues,
recently pointed out to me, the average middle class tax rate is already 43.12%, according to the
non-partisan Tax Foundation.
Beyond that, Willis says if we do go over the cliff, the average middle class tax burden jumps to nearly
50%.
I asked her how she came to that conclusion. I could only smile as she simply noted she’d “done the
math,” knowing full well that’s
one of the president’s tax hike
tag lines.
Unless Congress takes action,
Willis observed, the average
middle class federal rate jumps
to 28% from 25% when the
Bush-era cuts are allowed to
expire. At the same time,
payroll taxes will jump 15%
from 13.3% to 15.3%.
Factor in state taxes, which
average 4.82% nationwide, and
that would take the total
average middle class tax
burden to 47.5%.
Keep in mind that doesn’t
include state income tax hikes,
city or county taxes, many of
which are on the rise no matter
where you live thanks to
decades of poor fiscal
management.
Chances are, many middle-
class earners living in states
like California, Oregon, New York, New Jersey and Hawaii, for instance, will actually have
substantially higher tax burdens that, practically speaking, are well in excess of 50%.
The Rocky Ground at the Bottom of the Fiscal Cliff
The real world stakes behind the debate are very high.
Case in point, the President’s Council of Economic Advisors estimate that a rise in middle class taxes
and the corresponding decrease in consumption would shave 1.4% off GDP, which is consistent with
the signals being telegraphed from that other great oxymoron in DC, the Congressional Budget Office.
Even the president’s team has estimated that consumers will spend nearly $200 billion less as a result
of higher taxes alone.
Conversely, the latest GOP deal called for $800 billion in new revenue via tax reform while not
increasing tax rates on the top 2% of taxpayers. It also involves limiting tax credits and capping
deductions.
Naturally it was quickly rejected by the White House because it doesn’t meet the “test of balance”
according to White House communications director Dan Pfeiffer. House Minority Leader Nancy Pelosi,
D-CA, was quick to jump on the bandwagon noting that the GOP’s proposal is yet “another assault on
the middle class, seniors, and our future.”
Exactly -an assault on the middle class.
Willis believes “that taxes shouldn’t go up on anybody right now. Growth is sluggish and anemic
so the prospect of tax hikes don’t make sense, especially on those the president purports to
protect.”
I agree. What you want to do is improve growth. Do that and you have improved employment.
That, in turn, takes more people “off the dole and leads to higher receipts,” Willis added.
Half of Every Dollar Earned?
But how high should taxes go, and who’s going to pay them?
For some reason, corporate taxes are strangely missing from the entire discussion.
According to the United States Office of Management and Budget (OMB), the 2013 fiscal year budget
calls for $237 billion in corporate income tax revenue against individual income tax revenue of $1.165
trillion. If you add in Social Security and other payroll taxes, individuals are on the hook for more than
$2 trillion in taxes, or 81.25% of all revenues the government intends to collect.
Very few corporations actually pay the often demonized 35% U.S. corporate tax rate. In fact, the
average U.S. corporation pays just 12%. Many don’t even pay that.
Instead they use legions of lawyers and thousands of foreign subsidiaries to pay taxes only when they
bring them home and repatriate their profits. Or, they stage a tax rebellion of sorts.
Willis believes that the White House doesn’t grasp the fact this is already well under way as
companies like Oracle, Costco, Wal-Mart and more than 200 others rush to pay dividends early
with the express purpose of avoiding tens of millions of dollars in higher taxes that presumably
lie ahead in 2013.
Adding insult to injuries the struggling middle class has already sustained, what these companies are
doing is “all very quiet and perfectly legal,” she observed.
If only the middle class had that option.
Let’s just hope it’s not half of every dollar earned.
Coalition Tries to Play Down Vince
Cable’s Warning of Triple-dip Recession
Juliette Jowit
Guardian.co.uk
December 10, 2012

Both parties make light of business secretary's
comment that third recession is 'certainly' and
'clearly' a risk
The coalition has attempted to play down a warning
by the business secretary, Vince Cable, that Britain
faces the risk of a triple-dip recession.
In an interview with the Observer on Sunday, Cable
said the UK falling into recession for the third time
since 2008 was "certainly" and "clearly" a risk –
although he said the "most likely" scenario was that
the economy would continue "bumping along the
bottom" broadly as the Office for Budget
Responsibility has forecast.
Officials in both parties played down the significance
of Cable's comments. But the Treasury came close to
slapping down the Liberal Democrat business
secretary, saying bluntly: "It's quite right for the
independent OBR to make economic forecasts."
Danny Alexander, the Liberal Democrat number two
at the Treasury, also appeared to back the OBR
forecast, but suggested that his colleague should not
be dismissed outright.
The forecast "would suggest that we're not going to
have that [a triple dip] happening," Alexander told the
BBC's Andrew Marr Show. "But of course, look, it's
an uncertain world out there, we're seeing continuing
problems in the eurozone. But I'm happy to rest on the
OBR's forecast…"
Mark Littlewood, the director general of the Institute
of Economic Affairs, said that if Cable was making a
technical argument about one or two quarters of
negative growth the difference between a slight dip
and the low growth forecast was "so tiny as to mean virtually nothing".
However, if Cable was signalling a concern about the OBR's record of over-optimistic growth
forecasts, that was more troubling, he said. "The OBR now says that the UK economy will grow by
11.5% from 2013 to 2018. However, if they are as over-optimistic about this time period as they were
about this year, the economy will actually shrink by 4% between 2013 and 2018."
Littlewood said: "If Vince is of the view that the OBR numbers are seriously over-egged, the coalition
faces a huge headache. Tax revenues will be much lower and welfare bills much higher than they are
banking on. The deficit reduction plan is already teetering. It wouldn't take much for the deficit to start
growing again."
Alexander continued the theme of long-running austerity from last week's autumn statement, warning
that "squeezes" on government spending could continue into the next two parliaments – beyond
2020.Cable also warned that when growth did return, interest rates would have to rise, causing
problems for millions of mortgage holders "hanging by a thread … Even the recovery is going to be
very painful".
Cable lent his support to calls for the Bank of England to be given a target to boost growth, alongside
that of controlling inflation.

Show This To Anyone That Believes That
Taxes Are Too Low
Michael Snyder
Economic Collapse
Dec 7, 2012
Every year average Americans pay dozens of different
types of taxes, and yet many of our politicians are very
open about the fact that they want to raise rates even
higher and invent even more ways to bleed us all dry.
Someday historians will look back and be absolutely
amazed at how stupid we were. We have the most
complicated tax code in all of human history and at this
                                                point the federal tax code is more than four times as long
                                                as the entire collected works of William Shakespeare. In
                                                many places it is so incomprehensible that nobody
                                                actually understands what it means and the entire thing is
                                                absolutely riddled with loopholes from the beginning to
                                                the end. Trust me, I used to study this stuff. Nobody
                                                could ever read the entire thing – it is close to four
                                                million words long. But that is just for federal income
                                                taxes. We have a number of other taxes taken out of our
                                                paychecks such as state income taxes, Social Security
                                                taxes and Medicare taxes. Sadly, the taxes taken out of
                                                your paycheck are only just the beginning. As I will
                                                detail below, there are more than 40 other taxes that
                                                average Americans pay each year in addition to the taxes
                                                that are taken out of our paychecks. Our politicians love
                                                 to find ways that they can “raise revenue” without us
                                                 feeling it. Most people just focus on income tax rates
                                                 and they forget about the dozens of other ways that they
                                                 are bleeding us dry. It really is kind of like “death by a
                                                 thousand cuts”, and of course the middle class gets hit
                                                 the hardest. The poor are exempt from many taxes, the
                                                 ultra-wealthy are masters at cheating the system and
                                                 avoiding taxes, and so the most pain is always felt by
                                                 those in the middle. Hard working middle class families
                                                 and small businesses all over America are being
                                                 financially raped by this insidious system. If you know
of anyone out there that believes that taxes are “too low”, please show this article to them.
Just counting federal, state and local income taxes, some Americans will be paying marginal tax rates
of over 50 percent in 2013. But like I said, there are a lot of other taxes we pay than just those.
The following are 44 more taxes that at least some average Americans are paying now or will be paying
soon other than federal, state and local income taxes…
#1 Building Permit Taxes
#2 Capital Gains Taxes
#3 Cigarette Taxes
#4 Court Fines (indirect taxes)
#5 Dog License Taxes
#6 Drivers License Fees (another form of taxation)
#7 Federal Unemployment Taxes
#8 Fishing License Taxes
#9 Food License Taxes
#10 Gasoline Taxes
#11 Gift Taxes
#12 Hunting License Taxes
#13 Inheritance Taxes
#14 Inventory Taxes
#15 IRS Interest Charges (tax on top of tax)
#16 IRS Penalties (tax on top of tax)
#17 Liquor Taxes
#18 Luxury Taxes
#19 Marriage License Taxes
#20 Medicare Taxes
#21 Medicare Tax Surcharge On High Earning Americans Under Obamacare
#22 Obamacare Individual Mandate Excise Tax (if you don’t buy “qualifying” health insurance under
Obamacare you will have to pay an additional tax)
#23 Obamacare Surtax On Investment Income (a new 3.8% surtax on investment income that goes into
effect next year)
#24 Property Taxes
#25 Recreational Vehicle Taxes
#26 Toll Booth Taxes
#27 Sales Taxes
#28 Self-Employment Taxes
#29 School Taxes
#30 Septic Permit Taxes
#31 Service Charge Taxes
#32 Social Security Taxes
#33 State Unemployment Taxes (SUTA)
#34 Tanning Tax (a new Obamacare tax on tanning services)
#35 Telephone Federal Excise Taxes
#36 Telephone Federal Universal Service Fee Taxes
#37 Telephone Minimum Usage Surcharge Taxes
#38 Telephone State And Local Taxes
#39 Tire Taxes
#40 Tolls (another form of taxation)
#41 Traffic Fines (indirect taxation)
#42 Utility Taxes
#43 Vehicle Registration Taxes
#44 Workers Compensation Taxes
Sadly, this list is far from complete. There are many more forms of taxation that could be included.
When you account for all forms of taxation, there are some Americans that “play by the rules” that are
sending more than half of their incomes to the government.
This is why “tax avoidance” has become a multi-billion dollar industry in the United States. People are
sick and tired of being drained dry by a system that is way too complicated and way too unfair.
Posted below are 30 reasons why the U.S. tax system is stupid. Some of these facts I have
discussed before, and some of them are new. You might want to be sitting down while you are reading
this, because this list is likely to make many of you very angry…
1. Thanks to Proposition 30, many high income residents of California will be paying marginal income
tax rates of51.9%in 2013 if the fiscal cliff is not avoided. Keep in mind that the 51.9% figure only
includes federal and state income taxes. It does not count any of the dozens of other taxes that we pay
each year.
2. If a fiscal cliff deal is not reached, many residents of New York and Hawaii will also be paying
marginal income tax rates of more than 50 percent.
3. If Americans fully funded the government through their taxes without any borrowing, the average
American would have to work for 197 days just to meet the expenses incurred by government.
4. The U.S. tax code is now 3.8 million words long. If you
took all of William Shakespeare’s works and collected them
together, the entire collection would only be about 900,000
words long.
5. According to the National Taxpayers Union, U.S.
taxpayers spend more than 7.6 billion hours complying with
federal tax requirements each year. Imagine what our society
would look like if all of that time was spent on more
economically profitable activities.
6. 75 years ago, the instructions for Form 1040 were two
pages long. Today, they are 189 pages long.
7. There have been 4,428 changes to the tax code over the
last decade. It is incredibly costly to change tax software, tax
manuals and tax instruction booklets for all of those changes.
                                                                 8. According to the National Taxpayers
                                                                 Union, the IRS currently has 1,999
                                                                 different publications, forms, and
                                                                 instruction sheets that you can download
                                                                 from the IRS website.
                                                                 9. Our tax system has become so
                                                                 complicated that it is almost impossible
                                                                 to file your taxes correctly. For
                                                                 example, back in 1998 Money Magazine
                                                                 had 46 different tax professionals
                                                                 complete a tax return for a hypothetical
                                                                 household. All 46 of them came up with
                                                                 a different result.
                                                                 10. In 2009, PC World had five of the
                                                                 most popular tax preparation software
                                                                 websites prepare a tax return for a
                                                                 hypothetical household. All five of them
                                                                 came up with a different result.
11. The IRS spends $2.45 for every $100 that it collects in taxes. That is incredibly inefficient.
12. According to The Tax Foundation, the average American has to work until April 17th just to pay
federal, state, and local taxes. Back in 1900, “Tax Freedom Day” came on January 22nd.
13. When the U.S. government first implemented a personal income tax back in 1913, the vast majority
of the population paid a rate of just 1 percent, and the highest marginal tax rate was just 7 percent.
14. Residents of New Jersey pay $1.64 in taxes for every $1.00 of federal spending that they get back.
15. The United States is the only nation on the planet that tries to tax citizens on what they earn in
foreign countries.
16. According to Forbes, the 400 highest earning Americans pay an average federal income tax rate of
just 18 percent.
17. Warren Buffett had an effective federal income tax rate of just 17.4 percent for 2010.
18. The top 20 percent of all income earners in the United States pay approximately 86 percent of all
federal income taxes.
19. Sadly, as Bill Whittle has shown, you could take every single penny that every American earns
above $250,000 and it would only fund about 38 percent of the federal budget.
20. The United States has the highest corporate tax rate in the world (35 percent). In Ireland, the
corporate tax rateis only 12.5 percent. This is causing thousands of corporations to move operations
out of the United States and into other countries.
21. Some tax havens are doing a booming business in setting up sham headquarters for U.S.
corporations. For example, the city of Zug, Switzerland only has a population of 26,000 people but it is
the headquarters for 30,000 companies.
22. In 1950, corporate taxes accounted for about 30 percent of all federal revenue. In 2012, corporate
taxes will account for less than 7 percent of all federal revenue.
23. In a previous article, I discussed how many of our largest corporations make huge profits and
yet pay less than nothing in taxes….
     What U.S. corporations are able to get away with is absolutely amazing.

     The following figures come directly out of a report by Citizens for Tax Justice. These are
     combined figures for the tax years 2008, 2009 and 2010.

     During those three years, all of the corporations below made a lot of money. Yet all of
     them paid net taxes that were below zero for those three years combined.

     How is that possible? Well, it turns out that instead of paying in taxes to the federal
     government, they were actually getting money back.

     So for these corporations, their rate of taxation was actually below zero.

     If you have not seen these before, you are going to have a hard time believing some of these
     statistics…..

     *Honeywell*

     Profits: $4.9 billion

     Taxes: -$34 million

     *Fed Ex*

     Profits: $3 billion

     Taxes: -$23 million

     *Wells Fargo*

     Profits: $49.37 billion

     Taxes: -$681 million

     *Boeing*

     Profits: $9.7 billion

     Taxes: -$178 million

     *Verizon*

     Profits: $32.5 billion

     Taxes: -$951 million

     *Dupont*
      Profits: $2.1 billion

      Taxes -$72 million

      *American Electric Power*

      Profits: $5.89 billion

      Taxes -$545 million

      *General Electric*

      Profits: $7.7 billion

      Taxes: -$4.7 billion

      Are you starting to get the picture?

24. Exxon-Mobil paid $15 billion in taxes in 2009, but not a single penny went to the U.S. government.
25. If Bill Gates gave every single penny of his entire fortune to the U.S. government, it would only
cover the U.S. budget deficit for 15 days.
26. The number of traffic accidents spikes each year right around April 15th. The following is from a
recent Bloomberg article….
      Deaths from traffic accidents around April 15, traditionally the last day to file individual
      income taxes in the U.S., rose 6 percent on average on each of the last 30 years of tax filing
      days compared with a day during the week prior and a week later, according to research
      published in the Journal of the American Medical Association.

27. The elite are not stupid. They are not just going to sit there and let our politicians tax them into
oblivion. In fact, many of them will openly cheat if that is what it takes to avoid taxes. Most of them
have become masters at avoiding taxes or they have hired people that do that kind of work for them.
According to the IMF, the global elite are holding a total of 18 trillion dollars in offshore banking
havens such as the Cayman Islands.
28. It has been reported that 80 percent of all international banking transactions involve offshore
banks. A whopping1.4 trillion dollars is being held in offshore banks in the Cayman Islands alone.
29. An article that appeared in the Guardian estimated that a third of all the wealth on the entire
planet is being kept in offshore banks. One of the primary reasons for this is tax avoidance.
                                                       30. If a deal is not reached and the “fiscal cliff”
                                                       is not avoided, the average American taxpayer
                                                       can expect to pay about $3,500 more in taxes
                                                       next year.
                                                       Clearly, the tax system that we are using right
                                                       now is not working.
                                                       The big corporations and the ultra-wealthy have
                                                       mastered the art of moving money offshore and
using loopholes to make their tax burdens as low as possible.
So our politicians just keep finding more ways to squeeze more money out of the middle class and
small businesses in order to make up the difference.
If you are a middle class American and you don’t think that you are paying enough taxes already then
you are one sick puppy. They are draining blood from us in dozens of different ways, and they are
constantly inventing new ways to tax all of us. So what is the solution?
Well, a good first step would be to completely abolish the federal income tax. It is terribly inefficient,
it is way too complicated and it is terribly unfair. It rewards those that know how to exploit loopholes
and those that know how to cheat the system. Those that “play by the rules” always get the short end
of the stick.
Our government could easily be funded by tariffs and other forms of taxation that are more equitable.
There were vast stretches of American history when there was no federal income tax, and the federal
government did just fine.
And of course one of our biggest problems is that the federal government simply spends way, way too
much money. There is not a single category of
government spending that does not need to be reduced
and/or made much more efficient. The amount of
waste that goes on in Washington D.C. is absolutely
mind boggling.
Unfortunately, both political parties seem content to be
married to the current system so I would not expect
any significant changes any time soon.
So what do you think about all this?
Do you believe that taxes are too low, or do you
believe that they are too high?
Please leave a comment below with your thoughts, and
please share this article with as many people as you
can.



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