The Fiscal Cliff Approacheth

[Direckshun]

In an effort to make this thread sticky-worthy, I am going to update this OP to keep casual glancers informed.

This post is the official one-stop shopping of the key points/developments of the fiscal cliff negotiations.

Far as I understand, the fiscal cliff:

1. Gets rid of the Bush tax cuts for the wealthy.
2. Gets rid of the Bush tax cuts for everybody else.
3. Slashes defense spending by something like $500 billion.
4. Slashes domestic programs like the NIH, Head Start, and medicine/drug care for the poor by $500 billion.

The new idea is for Democrats to allow the cliff to hit, then immediately introduce a bill that would bring 2, 4, and some of 3 back. But not 1.

Here is a chart detailing exactly what the fiscal cliff is going to do, financially:

Spoiler!

Originally Posted by Direckshun

New CBO projection: if the fiscal cliff hits, we are in another recession, and lose two million jobs.

http://www.reuters.com/article/2012/...87L0JV20120822

The poor would be hurt by the fiscal cliff:

Originally Posted by Direckshun

Overall, if the tax breaks from the 2009 stimulus are allowed to expire—the EITC and Child Tax Credit expansions, along with American Opportunity Credit for college tuition—the poorest 20 percent of Americans would see their taxes go up by $209 on average, reducing their after-tax income by 1.9 percent, according to the Tax Policy Center.

As would the middle class:

Originally Posted by Direckshun

According to estimates by the Tax Policy Center, more than half of all married couples will owe an additional tax of around $4,000 unless Congress acts. And more than a third of families with children will fall subject to the AMT, with parents of three or more children facing an extra tax of $4,700.

Among married couples with at least two children and adjusted gross income between $75,000 and $100,000, the center estimates that 84 percent will face a significantly higher tax bill this year because of the AMT.

There seems to be some consensus between the parties that substantial revenues want to be raised. Boehner and the GOP hopes that's through limiting tax deductions rather than tax raises.

Obama's opening offer, essentially:

• Allow the Bush tax cuts on high earners to expire. $849 billion
• Limit itemized deductions to 28 percent, close some loopholes and deductions on high earners, eliminate tax breaks for oil and gas companies, eliminate the carried interest loophole, plus a few other items. $584 billion
• Create a special "Buffett Rule" tax rate for millionaires. $47 billion
• Restore the estate tax to 2009 levels. $143 billion
• Limit corporate income shifting to low-tax countries. $148 billion
• Other miscellaneous tax increases and reductions. About -$200 billion
• Total: $1.6 trillion

[patteeu]

Originally Posted by Direckshun

The federal government has ~2.65 million employees.

How many "few million" are you looking to reduce it by?

Barack Obama must have liked the results of disbanding the Iraqi military so much that he wants to import that policy to America.

[Direckshun]

Originally Posted by patteeu

Can we agree now that the President wants the top rate increased to satisfy a cosmetic goal rather than any kind of fiscal or economic goal?

Originally Posted by patteeu

Barack Obama must have liked the results of disbanding the Iraqi military so much that he wants to import that policy to America.

Somebody had a healthy breakfast this morning.

[patteeu]

Originally Posted by Direckshun

Somebody had a healthy breakfast this morning.

The first one was a serious question. So, can we at least agree on that?

[Direckshun]

Originally Posted by patteeu

The first one was a serious question. So, can we at least agree on that?

It's surely to satisfy a campaign promise, first and foremost.

You'd have to be naive to claim that there isn't political (cosmetic) and fiscal ramifications in equal measures, though.

[patteeu]

Originally Posted by Direckshun

It's surely to satisfy a campaign promise, first and foremost.

You'd have to be naive to claim that there isn't political (cosmetic) and fiscal ramifications in equal measures, though.

There are practically no fiscal ramifications of raising the top rate a couple of percentage points. How much revenue do you think that will pull in?

[Direckshun]

Originally Posted by patteeu

There are practically no fiscal ramifications of raising the top rate a couple of percentage points. How much revenue do you think that will pull in?

Over half of what a full retreat to the Clinton rates would.

I'm just a guy in a chair speculating, but I'm guessing that could be around 450-500 billion.

So. No fiscal ramifications?

[patteeu]

Originally Posted by Direckshun

Over half of what a full retreat to the Clinton rates would.

I'm just a guy in a chair speculating, but I'm guessing that could be around 450-500 billion.

So. No fiscal ramifications?

According to this taxpolicycenter.org breakdown from a couple of years ago, reinstating Clinton era rates on upper income taxpayers would be worth approx. $365 billion over 10 years. If we assume that raising the rate halfway toward Clinton era rates would yield about half that amount, we're talking about something like $200 billion over 10 years. That's a measly $20 billion per year in an era of $1 trillion deficits.

[Direckshun]

Originally Posted by patteeu

According to this taxpolicycenter.org breakdown from a couple of years ago, reinstating Clinton era rates on upper income taxpayers would be worth approx. $365 billion over 10 years.

Actually, the Tax Policy Center just a few days ago said the Clinton rates on high income earners would net $849 billion.

[patteeu]

Originally Posted by Direckshun

Actually, the Tax Policy Center just a few days ago said the Clinton rates on high income earners would net $849 billion.

That includes more than just returning top marginal rates to Clinton era levels. It also includes things like changes to cap gains and dividend treatment. (see items C, D, and E in the chart I linked).

According to John Hinderaker of Powerline, the Joint Committee on Taxation comes up with a number even lower than my estimate:

The Joint Committee on Taxation has done the math. Raising the top two rates as proposed by Obama would increase revenue by $22.35 billion in FY 2013, assuming that no economic activity is deterred by the higher rates.

That's for a full return to Clinton rates.

[Direckshun]

Originally Posted by patteeu

That includes more than just returning top marginal rates to Clinton era levels. It also includes things like changes to cap gains and dividend treatment. (see items C, D, and E in the chart I linked).

Who's to say those aren't on the table? Reportedly, they are.

You're putting the cart before the horse.

[Donger]

So, no other industries other than oil and gas are targets?

[patteeu]

Originally Posted by Direckshun

Who's to say those aren't on the table? Reportedly, they are.

You're putting the cart before the horse.

No, you're missing the point. Those may well be, and probably are, on the table. But the issue that we're talking about are top marginal rates.

[FishingRod]

I’m not sure what is more disturbing? That asking the wealthiest Americans to pay “a little bit more” is a $22.35 billion tax increase, or that raising taxes 22.25 billion will still leave 98 % or so of the deficit next year.

[patteeu]

Originally Posted by Donger

So, no other industries other than oil and gas are targets?

It's not an industry, but small business and people who try to responsibly save for the future are also targeted.

[Direckshun]

Originally Posted by Donger

So, no other industries other than oil and gas are targets?

I'm not sure. At this point, that's all that's leaked out of the GOP's camp.