When Fiscal policy is in chaos, companies can't plan for future

[InRareForm]

http://www.economist.com/node/21564241?fsrc=scn/tw/te/pe/giveusabreak

[boutons_deux]

yeah, the sequestration tactic is pure DC bullshit, pure theater, stupid melodrama. ain't gonna happen. Of course the Repugs are pleased if corps lay off/don't hire so the economy is a bad as possible for the election, which has been Repug strategy for 4 years, keep unemployment above 8%, which is why we now have "BLS truthers".

[Wild Cobra]

When fiscal policy is in chaos, companies cannot plan for the future
How many years have I been saying this here at Spurstalk now?

[RandomGuy]

How many years have I been saying this here at Spurstalk now?

You have been saying that.

You have also been ducking any responsibility that Republicans have for it, and sticking your fingers in your ears when it is pointed out that the important part is "consistent" not "unburdensome".

Mildly burdensome regulations are more preferable to businesses, than regulations and rules that might be changed at the whim of whomever is in power.

Sorry, this blame can be in no small part rightfully laid at the feet of the tea party, Norquist zealots, such as yourself.

[RandomGuy]

Business-backed groups such as the Campaign to Fix the Debt argue that, in the medium term, Congress needs to bring America’s swelling debts under control. All plausible deals to do this involve both tax hikes (which Republicans oppose) and cuts to entitlements (which Democrats hate). The choice, says Mr Cote, is between fixing the budget “thoughtfully and proactively”, or waiting “until the bond market forces us to do it, like Greece did”.

Some say the best tactic would be to walk one pace over the cliff and then turn back. Many Republicans have sworn never to raise taxes, which means they cannot agree to let any of Mr Bush’s tax cuts expire. But if no deal is reached and they expire automatically, restoring them for households that earn less than $250,000 a year (which the Democrats want) would count as a tax cut, so Republicans could agree to it without breaking their pledge. This sleight of hand was devised by William Gale of the Brookings Institution, a think-tank, and Peter Orszag, a former budget director for Mr Obama. Will it fool anyone? Perhaps.

Benjamin Franklin once said: “Nothing is certain but death and taxes.” These days, taxes are far from certain. And if that doesn’t change, American businesses could be dicing with death.

[vy65]

Shit's totally fucked. Totally fucked.

That being said, they'll thrash out some kind of agreement at the 11th hour, like they originally did with the debt ceiling. The worst will probably be avoided, but there probably will be some kind of fallout (i.e., the credit agency downgrades)

[boutons_deux]

"cuts to entitlements (which Democrats hate)"

"entitlements" is of course pejorative thanks to Repugs usage, as in "not deserving of", but retirees paid for and are entitled to/deserving of Medicare/SocSec payments.

"fiscal cliff" is also bullshit, melodramatic scare-mongering. and of course, no matter what the term, it won't arrive, because Congress will come with some bullshit fix, 1% protected, 99% screwed.

[Winehole23]

Everyone knows that the fiscal cliff means a big tax increase. The Tax Policy Center puts the number at $755 (http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/09/goldman-sachs-whatever-you-do-congress-dont-let-the-payroll-tax-cut-expire/) for a family in the middle-income quintile.


But what’s arguably more important than the cliff’s effect on the average tax rates that families pay is what it does to their marginal tax rates. Think of it this way. If you’re a married couple making between $75,000 to $100,000 a year, you’re paying around 8.1 percent (http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3492&topic2ID=40&topic3ID=41&DocTypeID=1) of that in federal income taxes. But you’re most likely in the 25 percent tax bracket. That means that for each additional dollar you earn, 25 cents goes to income taxes.


Marginal tax rates thus tend to influence peoples’ economic choices a lot more than their average tax rates. If I’m deciding whether to work overtime and get $1,000 more on my paycheck, I don’t care about what tax I’m paying on all my income. I care what tax I’d have to pay on that $1,000. High marginal tax rates thus function as a work disincentive. If I get to keep less of each additional dollar I earn, I’m not going to be as inclined to earn additional dollars.


Unsurprisingly, the expiration of the Bush tax cuts, the stimulus tax breaks, the Alternative Minimum Tax “fix” and the payroll tax holiday all combine to raise marginal tax rates across-the-board. But what’s perhaps surprising is that the hike is big for the very poor and very rich and less severe for those in the middle.


The Tax Policy Center quietly released numbers (http://www.taxpolicycenter.org/numbers/displayatab.cfm?template=simulation&SimID=447&relTTN=T12-0237) last week estimating marginal tax rates in 2013 under both current policy (that is, if we avoid the cliff) and under current law (if we go over it). People in the middle actually aren’t hit much. Households making between $40,000 to $50,000 a year, which is pretty close to the median, see marginal rates on wage income (http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=3554&DocTypeID=1) go up from 32.4 percent to 33.1 percent, when you count both the income and payroll taxes. That’s something, but probably not enough to deter a lot of people from working more.


Millionaires, by contrast, see their marginal rates of wages go from 38 percent to 44.2 percent. And the poor see rates go way up as well. Households making between $10-20,000 a year see marginal rates on wages go from 16.4 percent to 20 percent. Indeed, the marginal tax rate hike for poor people, as a percent of their previous tax rate, is enormous:

http://www.washingtonpost.com/blogs/ezra-klein/files/2012/10/marginal_hike_fiscal_cliff.jpg (http://www.washingtonpost.com/blogs/ezra-klein/files/2012/10/marginal_hike_fiscal_cliff.jpg)http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/10/11/what-the-fiscal-cliff-means-for-the-next-dollar-you-earn/

[scott]

There appears to be some poor math in that WashPo story. Can anyone identify the most glaring flaw?

[Winehole23]

I was a bit confused about how a 3.6% increase in marginal tax rates for poor folks got expressed as a 64.4% increase.

[boutons_deux]

I was a bit confused about how a 3.6% increase in marginal tax rates for poor folks got expressed as a 64.4% increase.

increase in income tax rate from a very low rate + end of the SS reduction?

[ElNono]

That's because it's somewhat misleading... I thought this was a good counterpoint to that article (snipped from the comments section):
http://senatorjohnblutarsky.blogspot.com/2012/10/the-progressive-fiscal-cliff.html

[boutons_deux]

Many commentators have said the cliff is not a cliff but a slope. eg, the govt won't cancel all contracts on 1 Jan, etc, etc.

the cliff is part of the bullshit scare-mongering melodrama from silly, childish Congress, esp the austerity-crazy Repugs.

But even the austerity of the slope, gleefully welcomed by the Repugs (if they can except, carve out their owners), will without any doubt depress the economy (of the 99%) severely.

[Winehole23]

I guess you'd say the same about the austerity crazy IMF, which is worried it could send the whole world into a tailspin.

[boutons_deux]

I guess you'd say the same about the austerity crazy IMF, which is worried it could send the whole world into a tailspin.

yep, the IMF finally said QE rather than austerity is needed. Keynsian counter-cyclical spending works, over and over and over, while pro-cyclical austerity is a disaster.

[Wild Cobra]

Myself, I'm getting used to this 25% marginal rate and 4.2% SS rate. I'm going to miss having all that extra money to support the economy with. I'm going to have at a minimum, $200/month less to work with!

They gave us the reductions gradually, and if they take it all back at once... It will catch a lot of people off guard.

[RandomGuy]

There appears to be some poor math in that WashPo story. Can anyone identify the most glaring flaw?

Don't leave us hangin'.

I couldn't find any in my quick read through.