Here We Go Again.. Fiscal Cliff, Downgrades, Recession, etc

By: ispeculatornew
Date posted: 11.12.2012 (4:00 am) | Write a Comment  (3 Comments)

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Quote from the WSJ:

Obama said any “fiscal cliff” compromise would have to include higher taxes on wealthier Americans, putting him directly at odds with Republicans hours after Boehner said the GOP wouldn’t agree to higher income-tax rates.

No matter who you think is right about this debate, I imagine that you are also discouraged about the prospect of another fiscal cliff debate. Feels like we just went through and it was a painful experience. So why go through it again? Most of you know that an important number of Republicans have signed a pledge to never raises taxes. I think that’s insane. I mean seriously… what if democrats made a pledge to not sign a new deal without new revenues… Then what? We wait until one of them accepts to “break its pledge”? Seems a bit childish to me.

What do you think? Am I way off here? I personally do think that while revenues are a part of the problem, deciding that revenues should not be increased no matter how or for what reason is crazy. It’s not a way to run a government. You might imagine that I’m this far left-wing democrat but believe me, it’s far from being the case. I have written time and time again about the taxes debate, how much more complex it is and how raising taxes is a popular thing to propose but it’s also a very simplistic (and idealist) view of reality.

So What Happens Now?

I guess we’ll keep hearing the exact same story from both sides for a few months until the deadline gets closer. At some point we’ll get warnings, possibly more downgrades, some of us will be affected and hopefully one of the two parties will end up backing down in order to reach some type of compromise. At this point, while I do hope that taxes are not raised significantly or much at all, I’d probably be happy if any type of reasonable deal gets done. I just hope that both parties know the risks that they are playing with in always

I certainly love the idea of eliminating tax loopholes but I have not heard a single good idea of how to get this done. If a few of them “don’t make sense”, how in the world will we determine which ones? Each company will be lobbying for loopholes that help them making it nearly impossible to get rid of even smaller ones…

 

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3 Comments

  1. Comment by Bernie — November 12, 2012 @ 11:09 am

    I agree that there are too many loopholes in the U.S. tax system and that it would be extremely difficult to “fix” them. I also think the tax system favours the wealthy.

    Why not just leave the income tax rates the same (as pre-2013) but incorporate a value added tax on goods & services similar to Canada’s GST. With this in place the larger consumers (generally the wealthier ones) would pay a larger share. Once the VAT clears the national debt, remove it.

  2. Comment by John Hunter — November 12, 2012 @ 8:01 pm

    By and large we vote for those that give big favors to those that give them lots of cash to use to show us TV ads. As long as we keep voting for those kinds of people they will keep giving favors to those giving them cash. It is hard to see getting rid of idiotic tax policy that favors hedge fund managers and trust fund babies as long as that is happening. We need to vote for people that put the interests of the country ahead of those giving them cash. But we continue not to do so, therefore change is not likely.

    All that happens is a bit of variation on what level of trust fund babies we want to exempt from taxes and how much to give to corporate farmers etc.. The differences in the parties policies are minor (only if you are at the extreme edge is it large difference). Neither party is talking about huge changes – I doubt the budget differences are more than 5% at the absolute most – probably less than 3%.

    The tax gimmicks people like Romney use, legally, are unlikely to be changed. Those people pay a lot to make sure the politicians keep the favors in place for them. And the parties are not different – maybe in what they focus on the most but both parties voted for huge tax breaks like eliminating taxes on trust fund babies, giving hedge fund managers (and even former hedge fund managers) super tax breaks…

  3. Comment by IS — November 12, 2012 @ 8:46 pm

    @Bernie – Good idea but I much prefer taking out a lot of the loopholes and at the same time reducing tax rates with a net increase in revenues, would be much more effective.. that’d be very very difficult to pass though

    @John – So many great points, thanks so much. The million dollar question though would be how do you turn this around? Who could pull it off? Just seems like the system is broken and it’s only getting worse…

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