Eat, drink, and be merry,

[Guinevere]

For tomorrow our taxes go up.

The Boston Globe just reported there will be no vote on any deal to prevent the US from going over the fiscal cliff tonight. That the "leadership" couldn't/wouldn't get this done is unconscionable. That the President couldn't/wouldn't get this done is another failure for him, no matter how hard it is spun.

I definitely need many drinks, my fiscal diet starts tomorrow. If only my country could say the same.

[Joe Guy]

It will be voted on tomorrow (1/1/13) and it will pass & we'll all live happily ever after.

I checked with Gob. It's already tomorrow where he lives...

[rubato]

Its a good thing.

Obama has won. Even the Republicans in the Senate have admitted it:

_____________________________
A top Republican senator is conceding defeat in the debate with President Obama over how best to avoid the “fiscal cliff,” accepting that tax increases now appear inevitable.

“Hats off to the president. He stood his ground. He’s going to get tax-rate increases,” Sen. Lindsey Graham of South Carolina said on “Fox News Sunday.”

“He won,” Mr. Graham said, a blunt assessment of the political environment on Capitol Hill now less than 48 hours before massive spending cuts and tax increases on most Americans go into effect on Jan. 1.

Mr. Graham also said that he’ll likely vote for a deal to avoid the cliff “even if I won’t like it,” stressing that GOP support for a compromise measure in the Senate will make it far easier for House Speaker John A. Boehner to rally his troops, something he was unable to do when promoting his “Plan B” solution to the fiscal cliff crisis.

As for specifics, Sen. Dianne Feinstein, California Democrat, said she and other Democrats would be willing to compromise on the income limit for tax increases. Most Democrats, along with Mr. Obama, have in the past drawn the line at $250,000, but Mrs. Feinstein and others — including the president — have bent on that figure in an effort to attract Republican support.

“What makes this government work is compromise. I could certainly live with it,” she said, also appearing on “Fox News Sunday.”

Read more: http://www.washingtontimes.com/news/201 ... z2GfmnuhGZ
Follow us: @washtimes on Twitter
______________________________


yrs,
rubato

[rubato]

There are several components to the 'fiscal cliff' (misnamed).

1.
All of the Republican tax cuts, which they wrote as temporary tax cuts, expire as the Republicans said they should.

2.
The temporary 2% SS tax cuts expire. As they ought to.

3.
Some manditory spending cuts go into place.

Only #3 is a problem for the economy overall and that only outside of the bloated defense budget.

My taxes are going to go up. Good. They should go up. We will pay about 2% more for SS (up to the limit) and an unclear amount more for income tax. So what? People in our tax bracket make more money than they need anyway.

yrs,
rubato

[Lord Jim]

The deal, (such as it is...it still leaves a lot of work to be done between now and the debt ceiling vote on mid Feb.) passed the Senate 89-8.....

I expect it will pass the House easily today. (Though I wouldn't take anything for granted at this point.) The fact that we are now past the 31st, will make it an easier vote for some, since they'll be able to spin it as a tax cut rather than as agreeing to let taxes rise.

All of the Republican tax cuts, which they wrote as temporary tax cuts, expire as the Republicans said they should.

Once again rube demonstrates his complete ignorance of both history and politics. (This time he manages to accomplish both in a single sentence.)

Rube apparently thinks that there were a bunch of Republicans sitting around in 2001 saying, "We believe that across the board tax cuts but only for 10 years, after that we believe we should have higher taxes."

The ten year limit was agreed to as a compromise with Democrats in order to get the tax cuts through the Senate. It was never understood (let alone desired) by the vast majority of GOP law makers that the after 10 years that the cuts would simply expire with no further discussion. it was always understood that as the ten year limit expired, the issue would be revisited, and that most Republicans would support extending the cuts or making them permanent. (To say the GOP wanted the tax cuts to expire after ten years makes no more sense than to say that when they voted to extend them in 2010, they only "wanted" them extended for two years. It was the best they could get done. This idea that the GOP really wanted tax cuts for only 10 years is revisionist rubbish)

In the end, they were able to make the cuts permanent for nearly 99% of Americans, and reduced the damage to the GDP that tax increases inevitiably cause (less damage will be done with a 450K cap than would have been done with a 250K cap) despite the fact that they only control one half of one branch of government; they should be happy about that.

Frankly I'm glad to get this class warfare sideshow debate about tax rates behind us (which the Democrats had demagogued quite effectively; my party was getting clobbered over it.) so we can move on to the real business of reducing spending, and adopting pro-growth policies.

[Lord Jim]

Here are some more details on the package:

The legislation would permanently extend the Bush-era income tax rates on individual income up to $400,000 and family income up to $450,000. It permanently sets the estate tax rate at 40 percent, up from 35 percent, and exempts inheritances below $5 million.[This is an important concession that the GOP achieved. The original draconian Obama proposal would have raised the rate 55% and had an exemption level of $1 million, which over time would have destroyed 1000s of small businesses and cost a huge number of jobs. Here again, the Republicans managed to gain something that will reduce the damage that would otherwise have been done.]

It would postpone the automatic spending cuts known as the sequester for two months and offsets the $24 billion cost of the delay with a mix of spending cuts and new revenues. The measure would also extend unemployment benefits for one year without offsetting their impact on the deficit, preventing 2 million people from losing government assistance.

It also would prevent a hike in congressional pay that authorized by an executive order from President Obama raising federal worker pay.[ ]

http://thehill.com/homenews/senate/2750 ... cliff-deal

The deal also prevents a 27 percent cut in fees for doctors who treat Medicare patients (that would have had a devastating effect on health care for millions of Americans) and prevents a spike in milk prices. (Apparently there was some quirk in the law that could have caused milk prices to rise to 6-8 dollars per gallon.)

The extension deadline on the sequester spending cuts coincides with the debt ceiling vote deadline, so we are guaranteed another round of last minute drama....

Of the eight Senators who voted against the package, 5 were Republicans, and 3 were Democrats:

Five Republicans and three Democrats voted against the bill: Sens. Michael Bennet (D-Colo.), Tom Carper (D-Del.), Chuck Grassley (R-Iowa), Tom Harkin (D-Iowa), Mike Lee (R-Utah), Rand Paul (R-Ky.), Marco Rubio (R-Fla.) and Richard Shelby (R-Ala.).

I expect we'll see something similar in the House, (though I doubt it will pass as overwhelmingly as it did in the Senate...and the possibility remains that the whole thing could be thrown into a cocked hat if some deal breaking amendment is added to the bill.) where the opposition breaks down roughly evenly between the left and the right.

The next deal is going to be much harder to achieve. (Not that this one was exactly a day at the beach) For starters, there are a number of liberals who would be happy to accept the sequester because it takes a meat axe to defense spending, and does nothing about entitlements. (Though it also takes a meataxe to discretionary domestic spending and would make their public sector union boss allies very unhappy.)

Though it didn't get anywhere near as much publicity as the GOP reps who wouldn't vote for a tax rate increase under any circumstances, there are a substantial number of Democrats who are on record as opposing any reforms on entitlement spending, even if Obama agrees to them. (They were up in arms over even the modest adjustment in SS the cost of living increase formula.)

And then there will be those on the right who won't see whatever deal that emerges as going far enough in terms of entitlement spending. I think the same process that was used here, with a deal being achieved in the Senate first, and then sent to the House, will need to be used for Round 2 (In fact that's probably how most major legislation will have to be done this session; immigration reform, tax reform, etc.) because the ideological divisions in the lower body have reached the point where it has become essentially dysfunctional when it comes to legislative initiatives. (The only positive thing is that Boehner will have a little more freedom of movement, having been re-elected as Speaker.)

Ordinarily in Presidential election years, the House and Senate convene for one day on January 3rd, to swear in the new Congress and take a bunch of pictures and have receptions, and then they go home till after The Inauguration. They really should not do that this year; the clock is ticking on sequester and the debt ceiling vote, (two major swords hanging over the economy) and given the torturous nature of this process they can ill afford to lose nearly three weeks.

[rubato]

Actually, the Republicans wrote the tax cuts to expire to get around PAYGO rules written by the Democrats and used to eliminate the deficit, but facts are only important to those who care about, you know, facts.

http://en.wikipedia.org/wiki/Economic_G ... ct_of_2001
"... Sunset Provision

One of the most notable characteristics of EGTRRA is that its provisions were designed to sunset, or revert to the provisions that were in effect before it was passed, on January 1, 2011. These provisions were extended for two years under the 2010 Tax Act. The sunset provision allowed EGTRRA to sidestep the Byrd Rule, a Senate rule that amends the Congressional Budget Act to allow Senators to block a piece of legislation if it purports a significant increase in the federal deficit beyond ten years. The sunset allowed the bill to stay within the letter of the PAYGO law while removing nearly $700 billion from amounts that would have triggered PAYGO sequestration.[5] ... "

One facet we have not said much about is the estate tax:

"... Those Clinton-era levels of a 55 percent rate and a $1 million exemption are much, much higher than what's being talked about as part of a fiscal cliff deal. According to Sam Stein and Ryan Grim of the Huffington Post, the latest proposal that really, really might turn into an actual deal would set the estate tax at a 40 percent rate, with a $5 million exemption, indexed to inflation. In other words, the first $5 million of any estate would not be taxed, but the rest would be at a 40 percent rate, with that $5 million exemption growing each year with inflation. And remember, these are exemption levels for singles; the exemption level for surviving spouses is double this. ... "



http://www.theatlantic.com/business/arc ... ks/266723/






Current rumors have it that a deal will be struck somewhere around 3M and 45% after that. A huge part of the budget hole disappears when rates go back.

yrs,
rubato

[Lord Jim]

Current rumors have it that a deal will be struck somewhere around 3M and 45% after that. A huge part of the budget hole disappears when rates go back.

Yo, Speedy:

The deal's already been passed in the Senate; the number is 5 million, and the percentage is 40% (as I posted earlier)

And once again an article rube quotes doesn't back up his claim; in fact it supports my claim (Christ, the idiot even underlined it ):

The sunset provision allowed EGTRRA to sidestep the Byrd Rule, a Senate rule that amends the Congressional Budget Act to allow Senators to block a piece of legislation if it purports a significant increase in the federal deficit beyond ten years.

I said the 10 year limit was used:

in order to get the tax cuts through the Senate.

Rube said:

All of the Republican tax cuts, which they wrote as temporary tax cuts, expire as the Republicans said they should.

He says the Republicans originally wanted the tax cuts to expire, I said the limit was put in to get the bill through the Senate, and guess which position the article rube quotes supports?

[Lord Jim]

In other words, the first $5 million of any estate would not be taxed, but the rest would be at a 40 percent rate,

uh no, more like:

[Joe Guy]

With a 5 million dollar exemption for estate taxes, (10 million if you're married with a trust) the average family will not pay anything and average business person will do very well.

Those of us with enormous amounts of wealth are very good at finding ways to pay the lowest possible amount in taxes...

And of course, our taxes are what gives our government the ability to build more bombs, fund studies on things like the pernicious polliwog's sex habits, give welfare benefits to illegal aliens, pay farmers not to grow things and keep our armed services people at war and/or stationed overseas to keep our earth secure.

It's our duty as Americans to pay as much in taxes as we must. If you love this country, you should be happy to contribute to it.

[Lord Jim]

The five million level will protect the existence of thousands of small businesses that would either be dissolved or sold off to larger companies at fire sale prices to satisfy tax obligations, with a one million dollar limit and a 55% confiscatory tax rate.

The ultra rich, (like the Hilton family), will both be well over the five million dollar limit, and also, (as Joe points out) have many mechanisms available to them to pass on wealth that will skirt these rules anyway.

[Sue U]

The five million level will protect the existence of thousands of small businesses that would either be dissolved or sold off to larger companies at fire sale prices to satisfy tax obligations, with a one million dollar limit and a 55% confiscatory tax rate.

The above, as I have pointed out before, is sheer bullshit:

Your parade of horribles is not supported by the actual data. For example:

Reality: The number of small, family-owned farms and businesses that owe
any estate tax at all is tiny, and virtually no such farms and businesses have to
be liquidated to pay the tax.

The estate of only 0.24 percent of all people who die in 2009 (i.e., the estates of
between two and three of every 1,000 people who die) are expected to owe any estate
tax, according to the Tax Policy Center.2 And only about 1.3 percent of the few
estates that still are taxable are small business or farm estates.3

Moreover, even if your assertion were true, what is so sacrosanct about "the family farm"? If it is so economically inefficient that it cannot survive without effective subsidy, why are you so hot to preserve it? Shouldn't the invisible hand of the market be left to do its work? Or do you still mourn the demise of the buggy whip industry?

Further, transfers of property can be effected in numerous ways other than an inheritance at death, and there is no reason that transfer of a farm or business to one's children can't be accomplished by sales that for example, might be paid for over time by income generated from the farm/business, or by distribution of shares in an S-Corp or through creation of a partnership.

And if there is some genuinely legitimate policy interest at stake in certain industries or types of transfer, it is not terribly difficult to create an exemption in the tax code.

viewtopic.php?f=3&t=4852&hilit=+Estate&start=40

I renew my call for a 100% tax on estates above a $1 million exemption.

[Crackpot]

Sue, Jim didn't mention farms

[Econoline]

From the link Sue provided:

Myth 5: Many small, family-owned farms and businesses must be liquidated to pay estate taxes.
Reality: Only a handful of small, family-owned farms and businesses owe any estate tax at all, and virtually none would have to be liquidated to pay the tax.

TPC estimates that only 40 small business and farm estates nationwide will owe any estate tax in 2012. (TPC’s analysis defined a small-business estate as one with more than half its value in a farm or business and with the farm or business assets valued at less than $5 million.) This figure represents only 0.0015 percent of all estates — that is, about one estate out of every 65,000 people who die this year. Furthermore, these 40 estates will owe just 3.1 percent of the estate’s value in tax, on average.

These findings are consistent with a 2005 CBO study that exploded the myth that many small businesses and farms have to be liquidated to pay the estate tax. CBO found that of the few farm and family business estates that would owe any estate tax under the 2009 rules, the overwhelming majority would have sufficient liquid assets (such as bank accounts, stocks, bonds, and insurance) in the estate to pay the tax without having to touch the farm or business.

Furthermore, for the few taxable estates that would face any liquidity constraints, there are special provisions written into the law for them — such as the option to spread estate tax payments over a 15-year period and at low interest rates — that would allow them to pay the tax without having to sell off any of the farm assets.

(If you exclude farms from the figures, the number of businesses affected would presumably be even fewer.)

The whole article is worth a read, BTW, and I'd be curious to know if Jim has any actual data (as opposed to anecdotes) that refutes their figures.

[TPFKA@W]

The extension deadline on the sequester spending cuts coincides with the debt ceiling vote deadline, so we are guaranteed another round of last minute drama...

And so we have it per cnn....

[Lord Jim]

I don't have a lot of time to go into this right now, but you go to page 19 of this CBO report:

http://www.cbo.gov/sites/default/files/ ... atetax.pdf

(since it's PDF I can't copy and paste it)

You'll find that as of 2000 (obviously these numbers would all be higher) you'll find these numbers:

Characteristics of Estates That Filed
Estate Tax Returns in 2000

Total Number of Estates...................108,322

Gross Value of Estate (Dollars)

Average 2,024,000
Median 1,092,000

Even the median was higher than 1 million in 2000, obviously higher now, so given these numbers it doesn't seem possible to me that so few could be affected as Sue claims.

[Lord Jim]

We could have some more drama on this yet...It's being reported that Cantor has broken with Boehner on this....

That's probably going to mean fewer Republican votes....

And if they amend it, the Senate has already left town, and they would only have tomorrow to reconcile the bills, because as of noon on the 3rd the new congress is sworn in, and the whole process has to begin over....

This is no way to run an airline....

[Joe Guy]

In 2009 the estate tax exemption was $3.5 million and 2012 it was $5 million. Is there any information in the article or somewhere else that shows that most small businesses and families with an estate valued over $1 million would not be affected by the lower $1 million dollar exemption?

[Lord Jim]

Well, now apparently the report about the Senate taking off is no longer operative, and they're expected to be back into session just about now....

And in the meantime, Boehner hasn't even been able to schedule a vote on this in the House yet....The GOP had one caucus meeting earlier and are expected to have another in about a half an hour....

The situation has now gone in just the pass few hours from looking like a done deal to teetering on the brink of total confusion....

[Econoline]

In 2009 the estate tax exemption was $3.5 million and 2012 it was $5 million. Is there any information in the article or somewhere else that shows that most small businesses and families with an estate valued over $1 million would not be affected by the lower $1 million dollar exemption?

From page 15 of the document Jim linked to:

Table 8.
Number of Estates Filing Returns and Number with Insufficient Liquidity to Pay
the Estate Tax in 2000, Under Various Exemption Levels

---

Estates Claiming Qualified Family-Owned Business-Interest Deduction

---

Exemption...............Estates Filing.........Estates Owing.......Estates with Insufficient Liquid
Amount...................Tax Returns............Estate Tax.......Assets to Pay Estate Tax Liability[/b]

---

Actual......................1,470.......................485...........................164
$1.5 Million..................692.......................223............................82
$2.0 Million..................440.......................135............................62
$3.5 Million..................223........................94.............................41

Not exactly what you asked for, I know, but as close as I could find in that document. Apparently the number of small businesses that would have trouble paying the estate tax out of current liquid assets would approximately double if you reduced the exemption to $1.5 million, but the total would still be a two-digit number rather than "thousands"...and of course, as has already been pointed out, that handful of business owners would have the option of paying off the tax in installments over a number of years. (You have no idea how long it took me to get that table data into a comprehensible semblance of its original form!)

(And BTW, Jim, I find I can select/copy/paste text from a PDF document...though of course the usual problems with posting tables still apply...)