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The Tax and Spend Spectator
Waiting for Taxmageddon
A vote for Obama is a vote for an immediate $500 billion tax hike.
ON JANUARY 1, 2013, JUST 56 DAYS after the November 6 presidential election, a series of temporary tax cuts will lapse, and rates will automatically and immediately “snap back” to where they once were, in some cases more than a decade ago. These increases will add $500 billion to the nation’s tax burden in 2013, and, over the next decade, will take $5 trillion out of the economy and ship it to Washington.
At the same time, several of the new taxes passed to pay for Obamacare will conveniently begin to bite. Someone, for some reason, believed it wise to delay those taxes’ implementation until someone was safely re-elected. Of the 20 new taxes or tax hikes in Obamacare, four will take effect January 1, including a 3.8 percent surtax on investment income (on top of existing capital gains and dividend taxes) and a 2.3 percent excise tax on medical devices, such as wheelchairs, pacemakers, and children’s braces. (If the Supreme Court strikes down Obamacare in its entirety, this would pare back the tax hit by $23 billion in 2013 alone.)
THE UNSETTLING LEGISLATION includes a litany of lower tax rates and higher credits that were enacted in separate packages.
The 2001 “Bush” tax cuts reduced marginal tax brackets from 15, 28, 31, 36, and 39.6 percent to 10, 25, 28, 33, and 35 percent; they also doubled the per-child tax credit from $500 to $1,000.
Not only are the old rates set to return, but a family’s taxes will go up $500 for every child it has under 18.
The 2003 “Bush” tax cuts reduced rates on capital gains from 20 percent to 15 percent and on dividends from 35 percent to 15 percent.
When the old rates snap back and the Obamacare investment tax of 3.8 percent is added, the top capital gains rate increases to 23.8 percent, and the rate on dividends spikes to 43.4 percent.
Thus the tax on dividends will nearly triple, from 15 percent to almost 45 percent. Some argue this will drop the value of dividend-heavy stocks by one-third. Perhaps the lost value will be less than that, but the direction is emphatically down. Big time.
The Alternative Minimum Tax (AMT) patch limits the number of families the AMT hits to “only the rich.” The AMT was enacted in 1969 to punish 155 wealthy Americans who were paying little or no taxes—probably because they were invested in taxfree municipal bonds. The “patch” was enacted in 2001 and has been renewed every two years since. Today, 4 million families pay the AMT. Next year, without the patch, it will apply to 31 million families and rake in $56 billion. Over the next decade, the AMT will confiscate $1.7 trillion from a pool of families growing to 55 million—those too rich for Obama’s taste.
The death tax also holds a surprise for any Americans foolish enough to die a minute after midnight on New Year’s Eve. The present death tax, which confiscates 35 percent of lifetime earnings above $5 million, will become one that takes 55 percent above $1 million.
In total, the hikes lying in wait will permanently increase the tax burden (in a non-recession economy) from 18.5 percent of GDP, the last two decades’ average, to 21 percent. Thus Obama’s increase in spending from 21 percent of GDP, the last two decades’ average, to his “new normal” of 23 percent will be locked in and “paid for.”
HOW DID WE GET SUCH A COLLECTION of temporary tax rates, and why are these cuts termlimited? Two big reasons.
First, Republicans in 2001 and 2003 could muster only a bare majority in the Senate. Without the votes needed to break a filibuster, they could only enact tax cuts through the “reconciliation” process that allows a federal budget to pass by a simple majority. But tax cuts passed that way can last no longer than 10 years.
Second, cutting taxes outside of reconciliation requires 60 votes—a high bar, as the modern Democrat Party opposes on principle any and all permanent tax cuts. In the pre-Obama, pre–Harry Reid years, this wasn’t necessarily so. Democrats provided 114 House votes and 25 Senate votes for the Reagan tax cuts. But there is no longer any such thing as bipartisan tax reduction. Democrats in Washington have refused to vote for permanent tax cuts since 1981. They are now a party of big government fundamentalists. They think your income is theirs to dispose of, and they view permanent, untargeted tax cuts the way East German border guards viewed defectors—that is, something escaping their control.
And some Republicans like temporary tax cuts. It forces the business community (read: campaign donors) to come back every two years to lobby to extend the research and development tax credit, and makes wealthy donors return to grovel for a new AMT patch.
About the Author
Grover G. Norquist is the president of Americans for Tax Reform.
RCV| 7.18.12 @ 6:11AM
EvenRepublicans are beginning to ask: Who cares what Grover Norquist thinks?
Jack London| 7.18.12 @ 7:52AM
Who's Grover Norquist?
Alej| 7.18.12 @ 9:38AM
A patriot with about twice your demonstrated IQ.
Truth to Power| 7.18.12 @ 10:02AM
San Bernardino needs both Jack and RCV to help with garbage pickup. This is what inevitably happens to incompetent tax and spend governments. One moment they are talking bullet trains and green energy and the next you can't get your garbage picked up. Forward to Greece and maybe Detroit if we are unlucky.
Kwan| 7.18.12 @ 10:27AM
Hey yeah right. Obama has to strip the population of their wealth and the gold in their teeth. Whadaya think fundamental transformation is cheap? Come on Norquist get with the program. If you don't want to live in the People's Republic of Zimbabwe that Obama is trying to convert us into then take a hike.
Brookschwarzenegro | 7.18.12 @ 6:58PM
Norquist is a libertopian.
Oldefarte| 7.18.12 @ 9:44PM
You wouldn't know him, since he's an American conservative and is what's descriptive of many in this country who somehow over the last four years of enslavement from this socialistic regime that conquered this country on 11/4/08 manage to earn INCOME and pay TAXES that completely fund our government's operations. He isn't a WELFARE RECIPIENT who fathers multiple chilluns and then runs to the nearest hospital ER to obtain his meidcal '''''rights''''; then returns home to his AFFORDABLE HOUSE that his Uncle Sam paid for, so that he can eats up on his vitals purchased with food stamps. Grover is whats known as a anit-Democrat or one of them there RICH DUDES WITH ''''INCOME''''''!!!!
C'mon Man!| 7.18.12 @ 8:11AM
Conservatives aren't asking, they are thanking him. You liberals are unhappy he exists.
Don't confuse Republican with Conservative, these days there is a big difference.
Pecos Pete| 7.18.12 @ 8:12AM
What's left to tax after the Democrats have taxed 100% of all income? Wealth. It is not fair that the rich have yachts and mansions and land and airplanes and diamond watches, etc. Nationalize all property and turn it over to the National Park
Service. Or the TSA. Jack and RCV and Violet and vtwin and others of their stupidity will be ecstatic. These people would prefer to live in North Korea where everyone is equal.
TLP| 7.18.12 @ 9:18AM
I scratch my head, when I hear these people BEGGING Obama to Enslave them.
"Please. Tell me what you want. Tell me what I can do to help you create a State, Big enough, and Powerful enough, to Control every aspect of my Life, from the Day I'm Born, until the day I DIE, because I was deemed Too Old to get the life saving Procedures and Medicines, by that very same STATE.
What do yo want me to do?"
Is there a SHRINK, in the House?
Mimi | 7.18.12 @ 9:44AM
NO....But we should get one assigned to the White House!
Gary B| 7.18.12 @ 2:02PM
Good question because liberalism is a mental disorder.
Alej| 7.18.12 @ 9:39AM
Remember "Ninety-five percent of Americans are going to get a tax cut?"
Alej| 7.18.12 @ 9:41AM
http://english.pravda.ru/opini.....sia_usa-0/
A Russian understands that half of America, while not calling itself Marxist, has fallen, hook, line and sinker, for Marxism.
Mimi | 7.18.12 @ 9:53AM
Grover....If there is ever granted a "HERO" list ...you get TOP DOG status , for those who helped get this country through the OBAMA years, probably the most perilous journey this nation endured...with our VERY FREEDOM, economical, and founding principles at stake.
Your COURAGE is appreciated.
MK48| 7.18.12 @ 9:55AM
The guy that cuts my hair is from Russia he came here over 15 yrs. ago......the other day he told me he is thinking of moving back.
paintbrush| 7.18.12 @ 9:56AM
Look, even any open minded Obama kool aid drinking liberal would have an a priori preference that our government should not consume most of the GDP.....and most non-ideologues in the sovereign-debt markets think the same way for good reason. If Obama's and Congress’s objective was to grow small business or business and help the economy rather than waterboard it in general, they would not have done one policy item that’s been done.
cicero| 7.18.12 @ 1:05PM
I am amused by the way we now discuss tax increases as being able to collect "only" tens or hundreds of billions of dollars. Those amounts are inconcievable anywhere else in the universe except the United States' treasury and congress. We have allowwed ourselves to be trapped in a rut that talks only about taxes. The real problem is SPENDING. We have allowedd Washington to get away with operating without a budget for almost an entire presedential term. Without a budget, there is no way to conrol spending.
We need to frame thee argument, not let the progressives do it.
Purp| 7.18.12 @ 1:20PM
Scare, scare, scare. Who the H**L is Grover G Norquist? Some dweeb that everyone should bow down to? I don't think so...
JD| 7.18.12 @ 4:18PM
Talk about an evasive response. Democrats invented the politics of fear, and they use it every day, mostly to avoid addressing points they don't like.
Oldefarte| 7.18.12 @ 9:47PM
You wouldn't know him, since he's an American conservative and is what's descriptive of many in this country who somehow over the last four years of enslavement from this socialistic regime that conquered this country on 11/4/08 manage to earn INCOME and pay TAXES that completely fund our government's operations. He isn't a WELFARE RECIPIENT who fathers multiple chilluns and then runs to the nearest hospital ER to obtain his meidcal '''''rights''''; then returns home to his AFFORDABLE HOUSE that his Uncle Sam paid for, so that he can eats up on his vitals purchased with food stamps. Grover is whats known as a anit-Democrat or one of them there RICH DUDES WITH ''''INCOME''''''!!!!
DonaldYoungsRevenge| 7.18.12 @ 4:09PM
I would like to know when Grover is going to begin to organize the Tea Party to have a "resignation party" for Barack Hussein Obama. It was all over DRUDGE, The Blaze, POLITICO, American Thinker, etc that Barack Hussein Obama has been flaunting a computer generated forged birth record, the April 27th, 2011 document. When is Gorover going to nail this corruption to the doors of those Congressmen/women he has a relationship with so that we can end this nightmare before the Democrats go to Charlotte. Lets make Joe Biden the guy looking for a running mate. The media has finally broke the story, jump on it Grover.
Houdini| 7.18.12 @ 5:40PM
Grover, with the re-election of BHO we will be lucky to reach down to Europe's level, odds are, it will be a death spiral. It will mean the end of this country as we have known it, and the potential for a repeat of 1861-65. We as a people should be ashamed of what we're doing to our children and grandchildren.
ElGordo| 7.18.12 @ 10:47PM
ObamaCare as a TAX is a winning issue. (Also as a Job Killer )
Forget Blaming Justice Roberts.
What Is Is !!
Romney and ALL the Republicans running for the HOUSE & SENATE must use it.
Use the video clips of Obama calling it a tax.
Use the voice clips of Obama's Solicitor General Lawyer stating in the Supreme Court that it is a tax.
Have a sketch or photoshop photo of Obama's lawyer before the Supreme Court Justices as the visual for the voice clip of his arguing that it is a tax.
List who in the middle class will pay these taxes.
Also point out that a disproportionate tax will be levied on those 30 & under, who need ObamaCare the least.
Alert those over 65 that $ 500 Billion is being taken out of Medicare to subsidize ObamaCare.
Have a picture of Obama with his nose growing, like Pinocchio, for background
The Republicans running against an incumbant Democrat Senator must remind the voters that his opponent's vote was the deciding vote to pass ObamaCare.
Finally, explain how ObamaCare is a Job Killer
jdmeth| 8.8.12 @ 10:37AM
The Dems fight every tax cut but the Republicans never fight to cut spending. Either way the debt grows and grows.