Conservatives may emerge well from fiscal cliff deal

[tailfins]

Some Republicans are being "peeled off" to support Obama's tax increases. If they pass with only a bare minimum support from GOP lawmakers to pass, it will benefit conservatives if there are negative consequences from the policy. I hope they let the likes of Graham and Chambliss fall on their swords.

http://www.foxnews.com/politics/2012/11/25/more-congressional-republicans-break-tax-pledge-for-sake-looming-fiscal-crisis/

[Kathianne]

Some Republicans are being "peeled off" to support Obama's tax increases. If they pass with only a bare minimum support from GOP lawmakers to pass, it will benefit conservatives if there are negative consequences from the policy. I hope they let the likes of Graham and Chambliss fall on their swords.

http://www.foxnews.com/politics/2012/11/25/more-congressional-republicans-break-tax-pledge-for-sake-looming-fiscal-crisis/

Only in their dreams.

[gabosaurus]

If you earn a lot of money, you are going to be hit the hardest.
If you depend on a lot of tax loopholes or shelters, you are going to lose all of them.

[Kathianne]

Gabby's pronouncements may not be prescient:

Should People Who Make $250,000 a Year Worry About Obama's Tax Proposals? - The Daily Beast (http://www.thedailybeast.com/articles/2012/11/20/should-people-who-make-250-000-a-year-worry-about-obama-s-tax-proposals.html)

Megan McArdle is a special correspondent for Newsweek and The Daily Beast covering business, economics, and public policy. A former senior editor at The Atlantic and writer for The Economist, Megan has a diverse work history including three small startups and a disaster recovery firm at Ground Zero.


Should People Who Make $250,000 a Year Worry About Obama's Tax Proposals?
by Megan McArdle Nov 20, 2012 11:51 AM EST
There are more wrinkles in the tax code than you think

Kevin Drum and Dave Weigel take off after rich people who don't understand that they only pay marginal tax rates on the extra dollars they earn above taxation thresholds. "This isn't true, of course. Obama is only proposing to raise tax rates on income over $250,000, so if your income goes up to $251,000, you only pay the higher rate on the extra $1,000. The tax bill on your first $250,000 stays exactly the same."

Their analysis is basically sound, except for the fact that it is not quite true. They have forgotten to look at deduction phaseouts, surtaxes, and the AMT, which are not taxes on marginal income.*

No matter what you have heard on the internet, there are in fact a lot of sizeable marginal inflection points for high earners. There are the Pease deduction phaseouts, temporarily abated by the Bush tax cuts but scheduled to go back into effect in 2013, which can eliminate up to 80% of deductions for couples who make more than about $175,000 (the number is indexed for inflation, so it changes every year): your deductions are reduced by 3% of the amount by which your income exceeds the threshhold. The student loan interest deduction phases out at $150,000 ($75,000 for singles). And a lot of tax-free savings opportunities disappear: educational savings accounts and IRAs have income limits, so your ability to use them starts phasing out in the low-six-figure income range. So do various educational and child tax credits. These things obviously aren't a huge deal for people who make $1,000,000 a year but they can be a huge tax hit for couples in the $150,000 to $300,000 range. Come 2013, they will be an even bigger hit.

And we haven't even discussed the AMT, which virtually eliminates deductions for couples who make the mistake of doing things like buying a house, having children, or living in a high tax state.

...

Links at site
Anecdotal, but these ideas do tend to take root:

Instapundit » Blog Archive » RESPONDING TO MARGINAL TAX RATES: Reader Alex Clay writes: After the election, my wife and I are… (http://pjmedia.com/instapundit/158375/)



November 25, 2012

RESPONDING TO MARGINAL TAX RATES: Reader Alex Clay writes:


After the election, my wife and I are going partial Galt. We’re in California, so our state income tax went up in addition to what’s sure to come out of Washington.

My wife quit her job last week. I increased my participation in a tax deferment plan offered by my employer to bring my taxable income as close to $250K as possible. We’ll be cutting back a little, but the government is going to getting a whole lot less.

My wife’s entire salary barely covered our tax bill – she was 100% slave to the government, while I was a 10% slave. Now she is 100% free, and I’ll be a ~35% slave As a couple, 17.5% of our time is slaving on the government plantation from an astounding 55% previously.

My wife is deliriously happy, our children are delighted to have mom home, the dog gets more walks, and I find not spending money rapturously satisfying.

I think we’ll see a lot of this. Whether it will add up to “Irish Democracy” or not, well, we’ll see.



Just think of how Obamacare has already led to entire industries moving employees from full-time to part-time. This week there's also been discussion of the disincentives for business with fewer than 50 employees to grow beyond 49, costs are prohibitive.

[tailfins]

If you earn a lot of money, you are going to be hit the hardest.
If you depend on a lot of tax loopholes or shelters, you are going to lose all of them.

Just lay off some employees to cover the additional tax bill. Higher taxes raises the needed probability of success to make an investment worthwhile.

[Kathianne]

Just lay off some employees to cover the additional tax bill. Higher taxes raises the needed probability of success to make an investment worthwhile.

Work less, produce less, pay less taxes. What a great idea for the government to construct.

[Tyr-Ziu Saxnot]

Work less, produce less, pay less taxes. What a great idea for the government to construct.

Looks exactly like a perfect formula to take a nation out of first world status , huh?
Looks exactly like a formula to break a business or a nation, huh?
Break a nation and you break its military, huh?
No accidental side effect !!-- Tyr

[DragonStryk72]

If you depend on a lot of tax loopholes or shelters, you are going to lose all of them.

Oh, so they are getting rid of the vast majority of tax loopholes and shelters for the middle and lower classes then? Because you do know those are the vast, overwhelming majority of tax deductions, right?

[revelarts]

The republicans are going to fold again? as it aint so.
how many years has the right been voting in Republicans that promise lower taxes, smaller deficits and smaller gov't? i know i've been voting for 25 years and i've yet to see a real move in that direction.

i beginning to think they are not serious.

[tailfins]

The republicans are going to fold again? as it aint so.
how many years has the right been voting in Republicans that promise lower taxes, smaller deficits and smaller gov't? i know i've been voting for 25 years and i've yet to see a real move in that direction.

i beginning to think they are not serious.

What do you suppose will happen if the House digs in it's heels and refuses to pass a tax increase no matter what? The cost of each path needs to be well thought out.

[aboutime]

If you earn a lot of money, you are going to be hit the hardest.
If you depend on a lot of tax loopholes or shelters, you are going to lose all of them.


So you have NOTHING to worry about at all Gabby. It's gonna be a LOSE, LOSE for you.

[fj1200]

Some Republicans are being "peeled off" to support Obama's tax increases. If they pass with only a bare minimum support from GOP lawmakers to pass, it will benefit conservatives if there are negative consequences from the policy. I hope they let the likes of Graham and Chambliss fall on their swords.

http://www.foxnews.com/politics/2012/11/25/more-congressional-republicans-break-tax-pledge-for-sake-looming-fiscal-crisis/

I wonder what would happen if they were to point out how much extending the middle class tax cuts would cost the treasury. Do they not have an interest in paying for reducing the debt?

[aboutime]

I wonder what would happen if they were to point out how much extending the middle class tax cuts would cost the treasury. Do they not have an interest in paying for reducing the debt?


fj. We must not lose sight of the BOTTOM LINE in all of these so-called Fiscal Cliff, hyperbole talks.

And that BOTTOM LINE is, and always will be. Politicians from both sides of the aisle....are now getting ready to campaign for more money, and the NEXT ELECTION.

Everything they do, or don't do. Is based on whether they want another Term to steal more of our TAX DOLLARS. Period.

[Kathianne]

I wonder what would happen if they were to point out how much extending the middle class tax cuts would cost the treasury. Do they not have an interest in paying for reducing the debt?

From all I've read, Obama's proposals are about punishing the rich, while spending more, much more, than he intends to take in.

Never to worry, the middle class tax increases with the elimination of deductions that have been 'standard' for years will increase the take of the government, but not enough to cover the intended spending. Elimination of mortgage interest, state tax payments, costs of education are all deductions I've heard of the past week. So too, 401k being sheltered. All seem to be flying over the heads of most Americans.

4 more years!

[fj1200]

Everything they do, or don't do. Is based on whether they want another Term to steal more of our TAX DOLLARS. Period.

So you're saying that even the most conservative of elected officials do not want to cut taxes, government, etc.? All is lost then eh?

[red states rule]

If you earn a lot of money, you are going to be hit the hardest.
If you depend on a lot of tax loopholes or shelters, you are going to lose all of them.

http://media.townhall.com/Townhall/Car/b/holb_c10554920121206120100.jpg