Wednesday, January 2, 2013

The True Costs of the Fiscal Cliff Debacle

The True Costs of the Fiscal Cliff Deal

I blogged yesterday about the faulty math of the fiscal cliff deal. Today we learn about the hidden gifts in the bill. We forget that the Vice President and Senate Minority Leader negotiated a tax bill.

Tax bills are historically Christmas Trees full of ornaments. We learnt today what the ornaments are.

The President tells us the bill is a start to reducing the deficit. The Congressional Budget Office says it will add $3.9 trillion to the deficit over the next decade. Even if you disagree with the CBO’s use of static analysis, who do you believe – the President or the CBO?

Here’s all we need to know. The 157 page bill is available on line in pdf form.  It was only made available to the Senators three minutes before they voted on it. So much for transparency! In short, the bill was like ObamaCare when House Speaker Nancy Pelosi said “We have to vote for it to learn what’s in it.”

The House had time to review the bill before voting. No wonder the conservative Republicans are livid!

The general details were quickly released to the public. It didn’t loo too bad at first glance:

        The income tax rates for individuals earning less than $400,000 and households less than $450,000 remain the same. Those making these amounts or more will see their income tax rates revert to the 39.6% rate of the Clinton years.

         The standard deduction will be capped beginning at $250,000 for individuals and $300,000 for households.

         The estate tax will rise 5% from 35% to 40% on estates of $5 million or over with the cap being indexed to inflation.

         The tax on capital gains and dividends will rise to 20% for individuals earning $400,000 and $450,000 for households.

          Others features include a permanent fix to the alternative minimum tax by indexing it to inflation and extending for another year the Medicare doctor fix.

         President Obama got his wishes in a one year extension of unemployment benefits and five year extensions of the child tax credit, earned income tax credit, and the college tuition tax credit.

         Sequestration was punted down the road for two months.

On the other hand, as was widely anticipated, Congress ended the payroll tax holiday. The President had no comments on the provision he once touted as an extra $40 in the pockets of American workers.

Today we discover the ornaments, the billion dollar budget busters.

1) Railroads – tax credits for maintaining their tracks;

2) Hollywood/Disney – “extension of specific expensing rules for certain film and television productions” including $15 million for producing in the United States and
$20 million for producing in low-income areas;

3) $59 billion in tax credits for algae producers (biofuels);

4) Extension of market loss assistance programs to asparagus producers;

5) 10% tax credit, up to $2,000, for purchasers of electric scooters;

6) NASCAR – 7 year recovery period for “motorsport entertainment complex property,” i.e. tracks, bleachers, and concession stands;

7) “Extension of the active financing exception to Subpart F.” The lobbyists must have worked overtime to slip this provision into the bill.  It’s worth $7 billion annually to certain manufacturers and banks, such as GE and JP Morgan Chase;

8) Extension of the exempt financing for the “Liberty Zone,” that is, luxury apartments and Goldman Sachs new headquarters near Ground Zero;

9) Incentives for mining companies to buy safety equipment and train their workers on mine safety;

10) Tax incentives for commuters using mass transit;

11) Extension of the controversial tax credit for wind companies;

12) $2/ton subsidy for coal produced on Indian lands;

13) Tax credits for foreign subsidiaries

14) extension of the research tax credit and bonus depreciation; and

15) extension of  a special benefit for American rum producers. The existing $14 tax on rum producers is accompanied by a $13 refund to Puerto Rico and the Virgin Islands to be used  in aiding rum manufacturing.

Explain why workers, the middle class, have to sacrifice $2,000 in earnings, real cash, so that Warren Buffett, the self-proclaimed undertaxed Warren Buffett, with the Burlington Northern Santa Fe Railroad, Lloyd Blankfein with Goldman Sachs, and Jeffrey Inmelt with GE, and the President's Hollywood buddies obtain billion dollar tax breaks?

Does this sound like middle class tax relief or corporate lobbyists at work?

Aren’t these the fat cat loopholes President Obama has ranted against?

Why should small business, the entrepreneurs of America, pay for tax braks for Goldman Sachs?

Don’t these tax breaks show the dangers of crony capitalism?

What contempt for the American people by the President who could not even stay in Washington to sign the bill but had to fly to Hawaii on the tax payer's dime to sign electronically!

$3.9 billion in increases to the public debt!

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