Friday, December 07, 2012

The fiscal slope and you

First of all, it ain't no cliff.

But it might feel like a brick wall, especially for the working poor. This story by Tom Abrahams at ABC-13 does a good job of explaining things in layman's terms.

It means some Texans could pay as much as 44 percent of their income in taxes, and it could come from the four elements of the fiscal cliff:

  • The Medicare tax, which affects mostly wealthier taxpayers
  • The payroll tax, which affects everyone
  • The AMT, which impacts most taxpayers
  • The Bush cuts, which are set to expire

[...]

The Tax Policy Center says the increase ranges from a few hundred dollars for the working poor to thousands for the so-called middle class. The White House estimates here in Texas, 8.7 million middle-income earners will see an average increase of about $2,200.

"It could be your Catholic school tuition's payment for your child, so it's not a small amount of money," said Joe Birkhofer, a partner at Legacy Asset Management.

Birkhofer says the part of the cliff that impacts everyone is the expiring Bush tax cuts. "People in the lowest tax bracket, 10 percent, will go to 15 percent. And people in the highest tax bracket will go from 35 percent to 39.6 percent," Birkhofer said. At just 3 percent a year, that's the equivalent of no less than a tank of gas every two weeks.

"I don't think that's fair to pay 3 percent more. We all can't afford three percent more," Houston taxpayer Judy Madison said.

Then everyone can tack on another 2 percent -- the amount of the payroll tax holiday which, ends this year. It's money that goes to Social Security and Medicare.

"The problem is the money needs to go back into Social Security and Medicare, and there's not a lot of support on either side of Congress to make that tax holiday stay," Birkhofer said. Add that 2 percent to the pile, and you've lost money for your electricity bill every month.

 "And I don't have a lot of confidence that both sides are really eager to fix the problem," Houston taxpayer David Gaw said.

Then there's the alternative minimum tax, or the AMT, which needs adjusting every year or it costs millions of taxpayers millions of dollars. "It strips away deductions so that your tax rate is higher," Birkhofer said. Throw those away, and there go your groceries every week.

"I'm worried not about 3 to 5 percent but more about 10 to 15 percent," Houston taxpayer Christopher Barron said. 

Obama and the Democrats seem content to let the Republicans push the country off the cliff down the hill, as polling indicates the GOP gets most of the blame. Boehner is under pressure again from his right to stand his ground.

Informal polling suggests many Americans still aren't paying much attention, despite Abrahams' man-on-the-street interviews above. That is likely to change suddenly, when the first payday after the New Year takes the hit. People who aren't getting paychecks, of course -- that would be the very rich and the very poor -- won't notice much.

For vastly different reasons.

1 comment:

Zachery d Taylor said...

Relatively speaking this is a manufactured deadline that is trivial compared to others although that doesn't mean there isn't something to it. The biggest problem isn't that taxes are too low but that the distribution of wealth is seriously rigged. The corporations rig things with the politicians so that they don't have to compete but workers do. And on top of that expenses that increase profits without improving the life for the consumers like advertising are passed on to the customer while this actually makes their life worse since it is designed to convince them to base their decisions on false premises.

On top of that there is also the much bigger threat of environmental damage which the alternative media is covering much better.