"Fiscal Cliff"

[Greenday]

Can someone break down this Fiscal Cliff crap I keep hearing about, but no one will actually explain? I'd check out links of it, but if I do that, I'm just going to get long winded articles that are bullet-pointed and don't really explain anything clearly.

I'm guessing a fair amount of this is just a dick measuring contest between the Democrats and Republicans.

[Gravekeeper]

Its basically a poison pill they created earlier as incentive to force themselves to do something. If they don't do something, it kicks in automatically with stuff they both don't want. Specifically, automatic spending cuts and expiration of existing tax cuts. Its not so much a dick measuring contest as it is the Republicans are cartoon supervillains and don't want Bush's tax cuts to the digustingly rich to expire along with the tax cuts to the poor and middle class. While Obama wants the tax cuts to the rich to expire while extending the cuts and credits to the poor and middle class. Obama also wants to rein in military spending and what not, while the GOP wants to cut the social safety net ( Because again, fuck poor people ).

There's literally nothing else to it at this point except that the modern GOP is a cartoon supervillain organization. -.-

[HYHYBT]

Phrased more neutrally (though personally I mostly agree with Gravekeeper's assessment):

Back when they messed up the country's credit rating fighting over the debt ceiling (generic "they" here), since they couldn't agree on how to make the budget less unbalanced, they agreed to do nothing for the time being. Instead, they set up a time limit, after which measures both sides hated would take effect unless they agreed to some other solution. Of course, one possible solution would have been to repeal the legislation that set this up in the first place... but what they've done, as I understand it, is mostly to push everything back another couple of months, to the end of February. THAT they could keep up pretty well indefinitely, and as a bonus it would mean, since they're always working on this "fiscal cliff" that they created themselves, they never have to do anything else.

[mikoyan29]

Basically it's like this:
Sometime ago, there was a deficit reduction committee formed because Congress couldn't come to some sort of budget agreement. The committee made a number of suggestions for reducing the deficit: reduced defense spending, reduced social spending, increased tax rates. The Tea Party folks balked at increasing the tax rates, so that lingered. And we reached the debt ceiling, so they agreed to cuts so onerous that both sides would want to do something. Instead they pissed around until they had to do something. And even then, they basically kicked the can down the road further.

The really sad part is that I don't understand why they are bitching about the tax rates. Because it's not the income tax rates that are the problem, it's all the loopholes in the tax code. But those loopholes benefit someone, so they aren't going to end. It's pretty sad when the tax code is thicker than the bible.

[Greenday]

The really sad part is that I don't understand why they are bitching about the tax rates. Because it's not the income tax rates that are the problem, it's all the loopholes in the tax code. But those loopholes benefit someone, so they aren't going to end. It's pretty sad when the tax code is thicker than the bible.

Because these people are rich, make tons of money, and don't want to give up more of their money. They'd rather poorer people suffer.

[bara]

Perhaps its cause Ive always been broke, but I dont see how it matters if you end up taking 50 million after taxes or 40 million.

Besides that, these people are not the 'job creators'. Jobs are created out of demand. There can be no demand when the majority of the population has no money to buy anything.
From what I see, most of these super rich remove more jobs than they make. They want 1000 employees to take a pay cut, benefits cut and then lay off or fire another 1000 but they never once seem to feel bad about the 100 million dollar parachutes they give CEOs for nearly bankrupting the company. 100 million dollars in the hands of the people actually creating the product does far more for the economy then some pretentious douche buying yet another mansion or yacht that they wont use anyway.

[Mytical]

It's a buzzword. Something to scare people to make them not pay attention to the real problems. See..they actually would have until april at least (and then they could just push it back some more) before any real worry. Even then..it's imaginary money. Heck, the government might be better off if we let everything expire..no money to pay their salaries.

[mikoyan29]

But here's the deal, if I'm a CEO and I make a 5 million dollar salary, I pay at whatever the top rate is. However, if I get a $500,000 salary and the rest is from capital gains, I pay the top rate on the $500,000 and the 15% on the rest. So it seems to me that the tax code is punishing people that actually earn their money.

[Nekojin]

But here's the deal, if I'm a CEO and I make a 5 million dollar salary, I pay at whatever the top rate is.

That's not quite right - that's a bit of an oversimplification. Moving from one tax bracket to the next doesn't change the tax rate on all fo your income - just on the income qualifying for the new tax bracket. So, no matter who you are, no matter how much you earn, the first $3800 (the so-called Standard Exemption) you earn is tax-free. From there to $8700 is taxed at 10%. Everything from $8700 to just over $35k is taxed at 15%. And so on.

[mikoyan29]

That's not quite right - that's a bit of an oversimplification. Moving from one tax bracket to the next doesn't change the tax rate on all fo your income - just on the income qualifying for the new tax bracket. So, no matter who you are, no matter how much you earn, the first $3800 (the so-called Standard Exemption) you earn is tax-free. From there to $8700 is taxed at 10%. Everything from $8700 to just over $35k is taxed at 15%. And so on.

That's what I meant. but I was referring to the fact that if I get $5 million, it's gets taxed as regular income. But if that 5 million comes as divedends or capital gains, it gets taxed at a much more favorable rate.

[guywithashovel]

I've heard some people say that the fiscal cliff should be allowed to happen because, even though it might hurt the country at first, it'll end up being good in the long run because it'll cut the deficit.

The haggling over the top tax rate has been quite tiresome. So Obama and the Dems want to let it tick up to 39% from 35%. They keep saying that will "kill America."

http://en.wikipedia.org/wiki/Income_...y_of_top_rates

However, if you scroll down a little bit on this wikipedia page, you'll find a history of the top tax rate in America. You'll see there have been times when that rate was much higher than it is now. Heck, between 1946 and 1964 the top rate was 91% (I'm sure very few, if any, actually paid that much, though). We still managed to have the 50s economic boom during that time frame.

[draco664]

That's what I meant. but I was referring to the fact that if I get $5 million, it's gets taxed as regular income. But if that 5 million comes as divedends or capital gains, it gets taxed at a much more favorable rate.

I'm not familiar with the tax laws in the US, but here in Australia, dividends are 'tax-free' only if the company is paying them out of nett profit - ie, tax is already paid on the income by the company.

[mikoyan29]

I'm not familiar with the tax laws in the US, but here in Australia, dividends are 'tax-free' only if the company is paying them out of nett profit - ie, tax is already paid on the income by the company.

Because of the Bush Tax Cuts, Divedends and Capital gains were taxed at 15%. After the Fiscal Cliff deal, that rate will be 20%. That is still less than what ordinary income is taxed at.

[draco664]

Because of the Bush Tax Cuts, Divedends and Capital gains were taxed at 15%. After the Fiscal Cliff deal, that rate will be 20%. That is still less than what ordinary income is taxed at.

Ah. I see your point then. In Australia, the corporate tax rate is (essentially) a flat 30% - . So all the dividends paid out by Aussie companies already have a reasonable tax burden on company profits.