Mining Affairs Forum
Fiscal Cliff I, II, III, IV…..
There are so many things to share about the last Fiscal Cliff experience and what is to come, where does one start? Since most of us can see the rising prices at the gas pump, grocery market (just watch corn!), and other services in-between, it is not difficult to see that increasing taxes is not a good plan for our pocketbooks. Not that our elite politicians really care, as they are not impacted by it. I thank God that there are finally some Congressmen that really do care and are trying to stop the insanity of big-spending liberals. So after this last vote on Jan. 2nd, just what happened and where are we headed? Will these statesmen have a chance to turn the tide?
All of the planned tax increases did not take effect, but the media made it sound as if they did. Not true. FICA/Payroll taxes jumped from 4.2%, where it had been the past two years, to 6.2%. That will average out to a hike of about $700 for the average wage earner, but when you look at the person making $50,000, that amounts to a $1,000 bite…ouch. Maybe it wouldn't hurt so much if we knew it was being set aside for our future Social Security income, but that stopped years ago. A few tax hikes that would have been tough, like the earned income tax credit, which helped those in lower income brackets, were spared, as was the child tax credit.
For those making over $250,000/couple or $200,000/single, Schedule A deductions will drop, such as on mortgage interest (the first step to doing away with it altogether) and miscellaneous business expenses. If you make more money than the average American, then Obama's favorite tax increases have taken effect already: jumps on dividend income and capital gains taxes. And, of course, we now have an increase on estate inheritances.
At least doctors working with Medicare patients have a delay in a planned 27% cut in their payments for work done! I still haven't been able to find anything about whether or not the marriage penalty was re-instated and I haven't had the courage to call and ask my CPA yet. Maybe I just don't want to know until I sit down in front of him in early February. Are any of you asking the same thing I have, year after year?
That is, why doesn't Congress just make these so-called Bush Tax cuts permanent? Why have to come back and extend them all the time? Why not make it incumbent upon them to raise taxes in the future rather than experience another fiscal cliff ordeal???? Anyone wonder why they won't just do it and leave the markets and us alone?
One last thought on the potential in this realm. All of these "extensions" need to be extended again in the future. And while this occurs, we still have high unemployment and more and more people on food stamps. Food stamp recipients have grown at an incredible alarming rate and if these tax credits and rates stay the same for middle-class Americans, it does not mean that they won't change later and add more burdens onto the government. They are just temporary for now. Millions of the unemployed are not even counted in the "official" number because they have stopped looking for work! It's more smoke and mirrors on the employment report. I personally believe that we have a president who likes having more people on the government dole so that he will be elected to a third term in the future, telling the public that if a more conservative person gets elected, their largesse will be stopped. It's Rome all over again.
Just Paying a "Little More"
President Obama has said repeatedly he would sign the bill to extend tax cuts (like he is doing us a favor) if it excludes households with incomes over $250,00 for couples and $200,000 for singles. Well, he almost got it-the numbers ended up $450,000 and $400,000 respectively. It is expected that with these tax increases, the government will have about another $44 billion to spend, according to the Tax Policy Center. If you are in that higher category, your rate not only goes from 35 to 39.6%, but you pay a "surcharge" of 3.8% in addition on certain levels of investment income. The president says we should be happy to just "pay a little more, but years ago paying a little more was not so hard, as we had a Cold War which resulted in lower military expenses and economic booms fueled by the expansion of the high tech industry. Today we are crippled by out-sourcing, a collapsing currency, and a crumbling Eurozone. And, as I mentioned earlier, dividend and capital gains increases will affect you. Now that we have another fiscal cliff coming the first of March, we are uncertain as to what the House can do with the constant threats from a president who is acting more like a king today, as Senator Rand Paul recently said to CBN News.
And Now for Business
Bill Dunkelberg summed it up for the business community, "When you're unsure about the future, you freeze. That is what is happening to consumers and small business owners. And that is why economic growth is continuing to be slow." Indeed it is. The stock market is acting schizophrenic for this same reason. Last May, the CEOs of 18 major companies including Verizon and UPS, sent a letter to the Secretary of Treasury stating, "We believe the administration's proposal (to raise rates on dividends and capital gains) will limit corporations' ability to raise new capital and will undermine economic growth. Lower dividend yields and higher taxes on dividends would also hurt economic security for taxpayers at every income level-particularly seniors, who rely heavily on investment income to make ends meet.
The threat of looming tax increases on dividends and capital gains could also increase volatility in the stock market this year (which it did, and is--ed.). Investment advisers are already cautioning clients to consider potential tax law changes for dividends and capital gains while making investment decisions." An Ernst & Young study found the new rates will put the integrated tax rate (taking into account state and local taxes) for capital gains at 56.7% and at 66.8% for dividends, "significantly higher than in all other countries."
Now, consider the increases from Obamacare. First, there is the 3.9% surtax for those with incomes over $200,000/250,000 for couples. Then we have the brand new cap on money set aside for medical expenses with Flexible Spending Accounts. Add in lower deductions for medical expenses for everyone and that amounts to a tax increase. Then there is now a tax penalty for non-medical withdrawals from Healthcare Savings Accounts. Bring in a 2.3% excise tax on medical devices which will obviously be passed on to consumers. Of course, we already have the 10% tanning tax, the "Medicine Cabinet Tax" eliminating the ability to buy over-the-counter medicines from the pre-tax Flexible Savings Accounts, and the penalty (starting in 2014) for those of us who don't want to buy health insurance. Finally, there is a potential 40% tax on "Cadillac" health care plans that an employer pays into that cost over $10,200 a year for individuals and $27,500 annually for families. That will begin in 2018. We normally call all of this "nickel and dime me to death."
But What About Cuts?
One thing our president and Congress do not like is cutting spending to have a balanced budget. It costs votes. Most of us can't remember the last time we had this phenomenon. What is most interesting about this is what is exempted: Social Security, Medicaid, Veteran's benefits and only 2% for Medicare. Civilian and military federal employees are also exempt, funding for Afghanistan, and more. Everyone must understand that what politicians mean by cuts and what you and I mean by cuts are two different things. Most of the spending "cuts" would take place over 10 years and would in reality be reductions in the rate of increase in federal spending.
Said Sen. Tom Coburn, (R-OK), "Both parties have equally participated in abandoning the limited role of the federal government. We spent money we didn't have on things we don't absolutely need, which refers back to the enumerated powers listed in Article I, Section 8 of the Constitution." Coburn uses education as an example. The federal government has spent $2 trillion on education since Congress passed the first Elementary and Secondary Education Act in 1965. Yup, that is all the older federal interference in education is. Says Coburn, "Why do we have 90-some teaching programs? Where in the world do we get the authority to have teacher training programs run by the federal government? Later in this interview with Reason.com, Coburn commented, "I actually don't believe we should get involved in things unless we have a direct national security issue." My, I wish we had a Congress full of Tom Coburns!
Debt and Defense
Not all military spending is genuinely for the nation's defense. Arguments for maintaining a military base are, more often as not, based more on the military and civilian jobs the base supports, rather than real defense needs. While some bases are no doubt needed, the dollars supporting jobs in any government program, military or civilian, are dollars that are taken through taxation that might otherwise be creating and sustaining jobs in the private sector.
With a military budget that has doubled since 2000, American security appears to not be lacking spending. Admiral Mike Mullen, chairman of the Joint Chiefs of Staff from 2007 to 2011 said, however, "I think the biggest threat we have to our national security is our debt." It is unusual for someone in his capacity to say something like this. We have 11 aircraft carriers and another in the works. Says Robert Gates, former Secretary of Defense, "Do we really need 11 carrier strike groups for another 30 years when no other country has more than one?" The Navy has 280 ships and submarines while our Air force dominates the skies. Why do we need more?
Now, hear this: The Pentagon spends more on research alone than Germany, France, The United Kingdom, Russia, or Japan spend on their entire defense budgets! And then we think we have to support 250,000 personnel in over 100 countries to boot! Why? We have not had a war in Korea for 60 years and yet we have 30,000 troops protecting South Korea, which has double the people, and 20 times the GDP of North Korea! We still have military bases in Germany and Japan, but WWII has been over for a few decades, hasn't it? Why should a European Union with greater population and GDP than the U.S. rely on us for their security? And why are we so willing to spend huge amounts of tax dollars to do it? By a 2-1 margin, Americans think we should withdraw our troops from Europe and let them defend their own land. I am one of them. I believe the same goes for South Korea. Fifty-five per cent believe we should be defending only America and our own interests.
It is time for America to get out of the foreign aid business, bring our troops and bases home, and stop wasting money, but even more importantly, lives of young men and women. It is time to demand that our leaders endorse and obey the Constitution of the United States. Our March toward socialism could be our immediate downfall and at the speed we are going now, could be very soon. None of us want that and it takes our joint concerted efforts at educating the public and our employees, along with voting intelligently, to re-capture our freedoms. Let's not just talk about it, but do something about it. What do you say?